Worried About Silver? Listen to Eric Sprott’s Stump Speech

by John Rubino on October 21, 2011

Hedge fund manager Eric Sprott’s speech at this week’s Silver Summit turned a room full of nervous precious metals owners into pumped-up silver buyers. Some of the highlights are posted below, and here’s a link to a recent Financial Sense interview where he makes many of the same points.

• The US Mint sells about the same dollar amount of gold and silver coins, which means it sells 50 ounces of silver for every ounce of gold. It’s more or less the same story at GoldMoney and Sprott Money.

• Ten times more silver than gold is produced each year, and the ratio in the earth’s crust is 15:1, so how can the price be 50:1? Expect a return to the historical norm of 15:1, which implies that silver will outperform gold.

• The demand/supply picture has seen a 380 million ounce per year positive swing — in a 900 million ounce market. Where is the silver coming from?

• The paper silver markets trade a billion ounces a day and the world only produces 900 million in a year. The amount available for settlement of these futures contracts is something like 1.5 million ounces, ludicrously little compared to the amount of paper.

• “On the physical side I’m seeing only buyers.”

• “There are a lot more people who can afford a one-ounce silver coin than an ounce of gold.”

• Gold will be a reserve currency and silver will also play a role.

• “We tried to buy 15 million ounces of silver and had to wait three months — and some of the silver we got was manufactured after we ordered. So there’s not a lot of silver sitting on shelves waiting for people to buy it.”

• “Somewhere along the line some manufacturer will say ‘I can’t get the silver I want’ and the jig’s up.”

• People will prefer gold and silver to having money in a bank where there’s tremendous counterparty risk. Three months ago Dexia was considered to be the best capitalized European bank and now they’ve been nationalized.

• “You go to some of the biggest names who own gold and ask them about silver and a lot of them haven’t even looked at it.”

• Central banks are selling gold surreptitiously.

• “It’s shocking how undervalued the junior miners are…Gold and silver stocks are growth stocks. They all have a plan to increase production dramatically. Small miners can start a new mine and double in size…The relative value of gold stocks will become apparent with time…The breakout, when it comes, will be very sudden.”

Full disclosure: The staff at DollarCollapse is massively long precious metals, especially silver.