Archives for November2010

Why Eric Sprott sees silver as the next big investing windfall

From Tuesday’s Globe and Mail
Published Monday, Nov. 29, 2010 6:30PM EST

You have been a bull on gold from the get-go. Is its price over $1,350 (U.S.) unfolding as you expected?
It’s been the investment of the decade. When I bought gold, I was buying gold to hold [as a long-term investment]. As it turned out, it quintupled. I didn’t think it would go that far because no none would have imagined that the central banks and governments would get themselves in a position where they are printing money.
The printing of money makes gold more valuable. You don’t have to be a genius to figure this out. The Johnny-come-latelies – the Paulsons, Einhorns and Soros – all figured out, when [the Fed announced the first round of quantitative easing], that they should own gold. It becomes more obvious every day as you see these financial challenges that we have in Europe.
But the real story now is silver.

Why are you more bullish on that metal?

Gold has traded at a ratio of 16-to-1 to silver in terms of price, but today it trades in the range of 50 to 1. I think the gold-to-silver ratio is going to go back to 16 to 1 given the passage of time, say three to five years. And I bet you that silver overshoots. The gold-to-silver ratio may even get down to 10 to 1. I believe that the price of silver has been suppressed.  LINK…

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Gold Fever: Pondering the Causes

The New York Times

Published: November 25, 2010

It is part religion, part politics. It is a way to voice a lack of confidence in the central banks of the world and a yearning for the world as it used to be. It is an investment that historically made sense when inflation was rampant, and yet it is soaring while the Federal Reserve frets about the threat of deflation.

It is gold.

Over the last four decades, the only ones in which gold was freely traded, gold proved to be a good buy precisely when it appeared the system was failing. In the 1970s, gold zoomed upward from artificially low levels, while stocks did not come close to keeping up with inflation. In the 1980s and 1990s, stocks rose at rates greater than 15 percent a year, and gold went down. In the first decade of this century, stocks declined while gold rose at a compound rate of almost 15 percent a year.

So far this year, both gold and stocks are up. That combination is unlikely to last out the current decade.

Betting that $1,400 gold will soon be $1,800 gold or $2,500 gold is basically a bet that the West really is in permanent decline this time, with countries facing the prospect of bankruptcy or sharp reductions in spending on everything from schools to pensions. Or perhaps all of the above.

Let’s hope the bet is wrong.  LINK…
This is the ironic thing about being successful in the Gold business. It means there is economic and social “unrest” in society. No sane person wants Gold to go ballistic but I don’t think there is much sanity in the current monetary policies of the Western nations. We now have QE in Europe for Ireland and the new QE in the USA. This cannot last long and Gold will be the only sound money in the world, it is inevitable and axiomatic. The big difference between Gold bulls and Equities bulls is that Gold Bulls fundamentally do NOT want to be right because of what it means for society, it’s a “protection play,” but sometimes the truth hurts and unfortunately this time it will really hurt.  BK

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