Monday, November 28, 2011

Interview with Eric Sprott

Transcription of Finance News Network with Sprott Asset Management Chairman and CEO, Eric Sprott.

Lelde Smits: Hello, I’m Lelde Smits for the Finance News Network. Joining me today at The Gold Symposium in Sydney, all the way from Canada is Chairman and CEO of Sprott Asset Management, Mr Eric Sprott. Eric, welcome to FNN.

Eric Sprott: Lelde, great to be here.

Lelde Smits: Now you’ve just given a presentation on investing in a financial crisis and talked about the importance of gold and silver. So just to recap, why should investors be looking at gold and silver?

Eric Sprott: Well as I mentioned in the speech, my initial interest in this gold and silver is because I thought there would be a physical shortage of gold, because central banks have been selling gold, mining companies have been hedging gold, investment demand was weak. So back in 2000 you could kind of sense that that was about to change. That the miners would stop hedging at those low prices; mines were going to go out of production because the price was too low, and that likely there would be a change in investor sentiment in gold. And that the physicalness of gold would make it appealing.As I mentioned in the speech, I was kind of blessed that we have central banks and governments who then decided they should act irresponsibly, because the economy was under pressure. So they come up with these ridiculous policies of printing money and TARPs (Troubled Asset Relief Program) and TALFs (Term Asset-Backed Securities Loan Facility) and budget programmes and so on. All of which was to sort of demise their own currencies which again gave I think, gold a much bigger push than even I might of imagined back in 2000. So those are the fundamental backdrops to our interest.

Lelde Smits: So with this sort of interest, how high do you think the price of precious metals will go?

Eric Sprott: Well that’s everyone’s favourite question and it’s a very difficult question to answer, because you don’t know how irresponsible governments are likely to be. So for example we don’t have QE3 yet in the US, but if we got a QE3 (Quantitative Easing) I think it would be a huge stimulus to the price of gold. Some people suspect we’ll get QE3 and QE4 and QE5, and I think probably the most sound measure where gold would go, is some relationship to the amount of money that exists. And today the amount of money that exists per ounce of gold is around $10,000. So it’s not hard for me to imagine it would go to those levels. But if we keep printing at the rate we are printing and of course we can go much higher than that. So suffice it to say that anyone who buys it here will not be disappointed with the performance. And even if it only goes up, you know its very simple 21% a year that it’s done for the last ten years, I think everyone would be very happy, including me.

Lelde Smits: So to gold, where do you see its price in six months’ time?

Eric Sprott: Well I suspect it’ll be north of $2,000. You know I think probably with this little rally we’re in now, we’ll probably break through the old highs and I won’t be surprised to see it easily get to $2,000.

Lelde Smits: And how about five years from now?

Eric Sprott: Hmmm, well five is tough because I don’t know how many QEs we’re going to have but I’m sure it will be substantially higher. You know if somebody said well do you think it can get to $5,000? Of course it can get to $5,000. Will it get to $5,000? I don’t know - it doesn’t have to get to $5,000 for somebody to like it at $1,800. Well particularly when you put it up against all other forms of investment - government bonds, stocks and so on which have not been performing well. So on a relative basis I think it’s going to be your best investment opportunity.

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