As the rising price of silver takes center stage within the financial community, an ever increasingly large number of investors wonder if now is the right time to make a move into this performing asset – or, better stated, to seek haven from a virtually hopeless slide in the value of the U.S. dollar (hand-in-hand with competing currencies) and make a real return on risk capital.
As long-time student of monetary history, founder of one of Canada’s largest independently owned securities firms Sprott Securities, and founder of Sprott Asset Management (with $9 billion under management), Eric Sprott told MineWeb’s Geoff Candy on April 5 that he expects the silver price to “treble that of gold over the next three to five years.”
And Sprott anticipates gold‘s move higher is far from over, offering a short-term target for the yellow metal of another nearly 35% rise from present levels of approximately $1,470.
“I think gold will continue to move on here,” he told King World News a day earlier on April 4. “We’ve certainly opined before that it will go north of $2,000 and the wind is at our back because the printing is increasing at a very fast pace here.”
Sprott suggested that if investors like the fundamentals of gold‘s potential allure as a moving vehicle away from a more profound currency storm yet to come, they’ll like the potential of silver‘s added octane more.
“The fundamentals for the two metals are entirely different,” he told MineWeb. “There is huge industrial demand for silver; there’s not much industrial demand for gold.” After factoring out industrial usage of silver, “ there are 10 times more gold available for investment in dollars every year, than there is [for] silver.”
Sprott added, “So if the guy is just as happy to own silver as gold, the fundamentals are going to diverge markedly here, and that’s essentially what we believe – that silver’s performance would treble that of gold over the next three to five years.”
On the demand side of the curve, the recently released World Silver Survey 2011, issued by the Washington-based Silver Institute, revealed that investment demand for the kissing cousin to gold rose sharply by 40% last year to 279.3 million ounces, up 169% from 2009.
Supply will struggle while demand is anticipated to soar, creating a set up for a perfect storm for higher future prices, argued Sprott.
Therefore, he, along with another credible source in the precious metals space, Goldmoney’s James Turk, expects silver to continue climbing to a target price of $50 per Troy ounce, sometime this year. Both men cite an ancient-held price ratio between the two monetary metals of 16:1 as a guide to their prediction for the silver price.
That ratio has been an accepted rule-of-thumb for pricing the two metals against each other for thousands of years, jibing closely with contemporary geological and production statistics which show earth deposits of 16-times more silver than of gold in Mother Earth.
As of today, the gold price-to-silver price ratio stands at 36.5.
“I’ve always thought that silver would move quickly to $50, and it would move to $50 this year – I thought it would get to $50 before year end,” Sprott said. “If you ask me in the three to five year time frame, obviously I think it’s going to go north of $100 simply because we’ll get that 16:1 ratio.” Gold, he said, is going a lot higher.
“Silver is the investment of this decade as gold was the investment of the last decade. So we’re sitting back waiting for things to evolve here,” Sprott concluded.