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With gold trading $40 higher, silver up nearly $2, crude oil rising $4.25 a barrel and mining shares on the move, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management to get his take on where he sees gold, silver, crude oil and the mining shares headed from here. When asked about the action in gold and silver, Embry said, “I do think there is a strong probability that the end of 2011 marked the bottom for gold and silver and that may be the lows that will ever be seen. That’s a strong statement, but the reality is gold and silver may never trade lower than that again.”
John Embry continues:
“When gold broke through $1,000, I said it would never trade below $1,000 again and it hasn’t. I now think that, unless we have a complete and total financial collapse in the world, I would be surprised if gold ever traded below $1,500 ever again.
It’s the beginning of the new year and there seems to be a burst of optimism in the air and it’s being reflected in markets. Virtually everything is trading higher today. Things will shake themselves out over the next few months and I continue to think that, by far, the safest place to be is in the precious metals. Gold and silver are on the move today and certainly the metals looked sold out to end 2011. Everybody that could sell did sell.
I had an amazing conversation this morning with a long-time friend of mine, who’s always been gold friendly, and he said, ‘I’ve been reading a lot on the weekend and I got the impression gold is going to be weak in the next few months.’ He asked, ‘Should I sell half of my gold position with the idea of buying it back in the third quarter?’
I said, ‘Are you out of your mind? I don’t know what you were reading, but I would be very surprised, unless the whole world melts down, if gold would be weak at all in the next six months. In fact I would say it’s going to go up $400 or $500 an ounce in the next six months.’ But that’s the kind of sentiment that’s out there and this was from a guy who has been a player in gold for years.
I really do believe that when you get the best and brightest this discouraged, and they can’t see through the gloom, you’ve probably bottomed....
When asked about Rick Rule’s comments, earlier today on KWN, where he said some junior explorers would go 50 to 100 times higher on big discoveries, Embry responded, “I admire Rick’s expertise in the junior sector, he’s one of the best in the world on the subject, he’s proven it through the years and he’s very right. Where you make your major score is where you get involved with a good management team, in a junior, that’s got a really good prospective play. If these people hit, it’s the creation of instant wealth.
One minute you have a company with almost no value, except they have cash in the till and smart guys running it, and suddenly they hit a big ore body that can be worth billions, almost overnight. This can be one of the great ways to riches.”
When asked about silver specifically, Embry stated, “I think the smash in paper has made the physical silver market that much tighter. I’m a huge believer in the gold/silver ratio dropping significantly as we move through this bull market.
I think the next leg up in the gold price will be accompanied by a falling gold/silver ratio to a level of 10/1 or 15/1. That just means the silver price will run three times faster than the gold price. The potential in silver is enormous and people are discouraged because of the smash the cartel laid on it. I wouldn’t be, I think it’s a great time to buy physical silver.”
Embry also had this to say about surging crude prices: “Crude oil is probably the most interesting commodity out there in the sense that if you looked at it strictly from an economic perspective, given what is happening with the world economies slowing, you could make a case for much lower prices. But the chart right now is breaking out to the upside, which would suggest the geopolitical considerations are coming to the fore. Under a bad geopolitical outcome, the crude price could easily rise to $150 to $200.
The Straits of Hormuz could be blocked and an altercation between Iran and Western countries and Israel might take place. So, I think this thing is fraught with peril and put it this way, if I had to be either long or short of crude oil, I would be long because I believe the geopolitical considerations are going to outweigh the economic ones, at least for the time being.”
