Swiss Bank Copies MF Global Fraud, Averts Disaster

When James Turk, Marc Faber, Eric Sprott and Gerald Celente say get your gold out of the hands of bankers, each one of these men isn’t hyping the gold trade.

Consider Switzerland, a nation which relies on customer trust of its banking system for a substantial portion of its Gross Domestic Product (GDP), and which holds approximately 28 percent of all funds held outside of the jurisdiction of the funds’ origins (The Boston Consulting Group Global Wealth 2009), committing a fraudulent disclosure of a highly sensitive financial product.  That’s what happened to a well-heeled customer of an unnamed Swiss bank charged with storing the customer’s physical gold bullion, according to Egon von Greyerz, founder of Switzerland’s Matterhorn Asset Management.

“We are stressing to investors to take their gold out of the banking system, not only because there are runs on banks that will continue, but the risk of being in the banking system is major,” von Greyerz told King World News.  “So you should take the additional step of not just owning physical gold, but also owning it outside of the banking system.

“We (just) had an example of a client moving a substantial amount (of gold) from a Swiss bank to our vaults, and we found out the bank didn’t have the gold. This was supposed to be allocated gold, but the bank didn’t have it.  We didn’t understand why there was a delay (in our vaults receiving the gold), but eventually we found out why there was a delay (the bank didn’t have the gold).  It’s absolutely amazing, but not surprising.”

Reminiscent of another landmark breach of fiduciary trust in the U.S., regarding one of the Fed’s primary dealers MF Global and Gerald Celente’s gold futures account, the revelation of banking fraud has moved to Switzerland. But fortunately, the Swiss bank in question scrambled to find the gold—and was successful acquiring the bullion for its customer—this time.  Though, in the case of Celente, he still hasn’t been made whole from his missing ‘allocated’ brokerage account held at MF Global.  And the gold he contracted for delivery was credited to JP Morgan’s books, instead.

“Every financial institution is under the same kind of pressure as we see in Europe. If you think your money is safe with any of those big names, you’re making a big mistake,” Forbes Magazine quoted Celente in an interview of Nov. 17, 2011, more than two weeks after MF Global’s Oct. 31 bankruptcy.

“When I say take your money out of the banks and put it under the mattress, this is not advice,” Celente said, reminding listeners of the interview that he is not a registered investment adviser.  “Personally, I buy gold coins from reputable companies. I take my money out of investment funds and I buy gold and silver. You need the three g’s — gold, guns and a get-away plan.”

Celente has stated numerous times that, not only bank cash accounts, but bullion stored within the banking system should be withdrawn and held at fee-for-service storage facilities—such as private bullion storage vaults—or home safes.

Cracks in the physical gold market can be anticipated, according to CFTC testimony from one of the gold market’s leading apologists of JP Morgan’s suspicious derivatives trading, Jeff Christian, founder of commodities consulting firm CPM Group, though Christian’s statements weren’t expressed clearly to the layman.  Note: Jeff Christian once worked for Goldman Sachs, another firm suspected of rampant fraud in the derivatives market for mortgage-back securities.

“The CFTC, when it did its most recent report on silver, used the term that we use, ‘the physical market.’ We use that term, as did the CFTC in that report, to talk about the OTC market — in other words, forwards, OTC options, physical metal, and everything else,” Christian told CFTC Chairman Gary Gensler in a Mar. 25, 2010 testimony, admitting to the Commission that the CFTC weekly reports regarding physical inventories at the COMEX includederivatives.  Emphasis added.

Gold Anti-Trust Action Committee (GATA) Director Adrian Douglas provided one of the most powerful testimonies at the CFTC hearing, when he pointed out the enormous size of paper gold in the market (led by JP Morgan’s derivative desk) and the tacit implication that physical gold allegedly held for unsuspecting clients across the globe may not exist, including gold allegedly stored in Swiss banks in alleged ‘allocated’ accounts.  In other words, there’s approximately one ounce of gold for many times more paper gold, which, if called for delivery, could force another MF Global incident anywhere in the world.

“ . . . if we look at the physical market, the LBMA, it trades 20 million ounces of gold per day on a net basis, which is $22 billion,” Douglas told the CFTC.  “That’s $5.4 trillion per year. That is half the size of the U.S. economy. If you take the gross amount, it is about 1 1/2 times the U.S. economy. That is not trading 100-percent-backed metal; it’s trading on a fractional-reserve basis.”

And, on Monday, CFTC Chairman Gary Gensler has opened another investigation into JP Morgan’s derivatives trading losses from activities its CEO Jamie Dimon initially said where executed as hedges, according to Dow Jones Newswire.  However, Bloomberg has confirmed that Dimon has since retracted his statement regarding the type of trading activities that resulted in a substantial loss.

“Commodity Futures Trading Commission Chairman Gary Gensler said the agency had opened an investigation into JP Morgan Chase’s trades, which have resulted in a more than $2 billion in losses so far, but declined to comment on the specifics of the probe,” stated Dow Jones Newswires.

The full extent of the losses and ramifications of the red ink at America’s largest Fed primary dealer to the global banking system are not yet known.  Speculation of banks calling in gold to sell it into the marketplace to remain liquid run rampant.   von Greyerz’s statement to King World News only serves to escalate nervousness among investors to run to physical bullion in the gold market.

Eric Sprott: Record Silver & Gold Prices this Year

Speaking with GoldSeek Radio, billionaire investor Eric Sprott of Sprott Asset Management argued that gold and silver bullion will reach record highs this year.

“I think that gold was the investment of the last decade, and I suggested that silver will be the investment of this decade,” Sprott told GoldSeek’s host Chris Waltzek.  Sign-up for my 100% FREE Alerts

After bottoming near the $280 level in 2000, gold soared to as high as $1,200 before closing 2010 at approximately $1,100, for a 294 percent gain for the 10-year period.  On the other hand, silver began the year 2000 at $5 and ended 2010 at $16.25, for a 225 percent gain for the same period.

Sprott believes the precious metals will make new highs this year, a prediction not supported by Jim Rogers of Rogers Holdings and Marc Faber of Marc Faber Limited and publisher of the Gloom Boom Doom Report.  Though Rogers and Faber are bullish on gold and silver in the long term, both gentleman have said 2012 will be the year of further consolidation and a possible test of the 40-month moving average near the $1,200 level.

“I think both gold and silver will trade before the end of the year at new highs,”  Sprott told

On gold stocks, Sprott said ETFs and trusts, such as the gold and silver trusts he offers, have diverted a lot of money out of the gold and silver mining shares and into the metals.

“I think it’s undoubtedly true that the amount of money going into gold-like products, such as ETF’s and our trust, have definitely taken away from the stocks,” he said, and added that it’s now silver’s turn to shine brighter than gold.

“And the reasons I come that conclusion is by watching what people do with their money,” Sprott continued.  “So for example, when we analyze, for example, the U.S. Mint sales.  They sold as many dollars of silver as they sold dollars of gold last year in terms of gold coins.  That means that essentially, with silver trading at a 50 to one ratio, people bought 50 times the amount of silver as did they gold.”

In addition to demand statistics, Sprott noted the available supply coming to market each year will put a lot more upward pressure on silver when compared with gold.

“The amount of silver that’s available for investment each year is 450 million ounces and the amount of gold that’s available for purchase is about 70 million ounces, which means you have a ratio of about six-and-a-half to one is amount of silver you can buy versus gold,” he explained.

“For the life of me, I can’t see why silver would massively outperform gold over the next few years.”  Sign-up for my 100% FREE Alerts

Hey Silver Bugs, Start Buying!

As silver continues to slide from Wednesday’s mini massacre, with today’s trade already dropping silver below its 20-month moving average of $32.74, accumulators of the white metal should immediately begin scaling into the metal in preparation for the next assault on $50, according to precious metals bulls.

The brightest minds of the bullion markets agree that a coordinated take down of the PM complex was orchestrated in advance of an upcoming big event—or two.  James Sinclair, Goldmoney’s James Turk and Sprott Asset Management’s Eric Sprott agree that central banks were behind Wednesday’s assault. Sign-up for my 100% FREE Alerts

Moreover, many within the PM community, as well as those outside of the relatively small bullion market clique, believe that the recent rally from last December’s lows foreshadows something big anticipated this year.

Marc Faber of the Gloom Boom Doom Report and Jim Rogers of Rogers Holdings place strong odds that Iran will be attacked—but, by whom and when, are unclear.  But an attack is “almost inevitable,” Faber told Reuters on Tuesday.

Two weeks ago, Rogers told India-based Economic Times an attack on Iran is “madness” on the part of the U.S. or Israel, as a threat to the world’s fifth-largest oil by the West (or allies) would most likely escalate a confrontation with Iranian allies, Russia and China.  Crazy? Yes, “but it looks like it will” happen, he said.

Though Iran’s threat to close the Strait of Hormuz could soar oil to $200, taking already-disintegrating Western economies down harder, still, both Faber and Rogers believe that the Fed and ECB would then be forced to openly announce more ‘quantitative easing’—though Rogers has said on several occasions that the Fed hasn’t stopped QE2.

“Say war breaks out in the Middle East or anywhere else, (Fed chairman) Mr Bernanke will just print even more money.  They have no option; they haven’t got the money to finance a war,” said Faber.

Roger’s hasn’t offered a plausible reason for the U.S. (or Israel) to attempt a geopolitical move against Iran so outrageous as to characterize it by him as “madness.”

But Faber does proffer a strong enough motive to make sense of such a bizarre plan—a plan that threatens to draw two Asian nuclear powers in defense of Iran.

“The Americans and the Western powers know very well they cannot contain China economically, but one way to contain China is to switch on and switch off the oil tap from the Middle East,” Faber said.

The lesser-discussed issue in the Middle East, which, by proxy, would most likely draw Russia and China into a military confrontation with the West, revolves around Syria and its known reciprocal defense treaty with Iran.  An attack on Syria equates to an attack on Iran—which brings back again the likelihood of Russia and China as defenders of Syria.

Last week at the United Nations, Russia and China vetoed proposed sanctions by Europe and the U.S. against Syria.

“Some countries submitted a draft resolution to blindly impose pressure and even threatened sanctions against Syria. This would not help to ease the situation,” Chinese foreign ministry spokesman Ma Zhaoxu said, according to Agence France-Presse (AFP)

Russia’s envoy to the United Nations, Vitaly Churkin, said the UN draft was “based on a philosophy of confrontation,” and added that sanctions imposed on Syria were “unacceptable” to Russia.

In response to the veto from Security Council members, Russia and China, American Ambassador Susan Rice said she is “disgusted” at Russia and China’s decision to veto the UN resolution to sanction Syria.

Russia’s Churkin struck back.  “Unfortunately, some of our colleagues choose to make rather bizarre interpretations of the Russian proposals,” said the Russian UN Ambassador.

After last week’s war of words between the U.S., Russia and China over the U.S. Security Council vetoes, Faber cannot help but to believe that the next step could include unilateral action by the U.S. in the region.

He told Reuters, “I happen to think the Middle East will go up in flames,” and added, “You have to be in precious metals and equities . . .”

On Friday, Faber told The Gold Report, “If you don’t own any gold, I would start buying some right away . . . ” Sign-up for my 100% FREE Alerts

Sprott Makes His Move of the Comex, Physical to Break from Paper

Following the dramatic and viral news of famed trends researcher Gerald Celente’s confiscated MF Global future brokerage account, scaring legitimate commercial sellers and buyers like a Celente to withdraw from the fraudulent system, the crafty Canadian billionaire Eric Sprott positions himself to make a bold move to finally break the Comex grip on the silver market.

In his Nov. 25 interview with King World News, Sprott’s noticeable focus shifted to his PSLV closed end fund, from his usual discussion with King about the European fiasco and other selling points for owning bullion.  Sign-up for my 100% FREE Alerts

After a brief moment discussing the tired, yet power ‘printing presses’ case, for owning bullion, the discussion turned to the real juice.  His message to both physical buyers and sellers of silver:  You can trust me to deliver.

Here’s how it works—

“If you had a total bust and people feared the banking system and started buying gold,” Sprott said,  “. . . by that time currencies will almost be worthless . . .”  And no one will take on counter-party risk at that point, either.

“All you know is that there’s only a couple of things that you have to have your money in to be safe,” he continued.  “For example, I’m writing a letter basically suggesting to the silver producers, you know you guys have all of this money in banks, why do you have it in banks?”

Knowing full well that mining CFOs cannot justify holding their own inventory in lieu of cash on their balance sheets because the company suddenly wants to become a hedge fund instead of silver producer, it appears that Sprott may likely follow up his “letter” with a personal visit to explain to the brass that he would like to nudge the Comex out of the business of clearing deliveries.

And why not?  Sprott’s $1.5 billion available firepower today now represents more than the 31 million ounces worth of silver stored at the Comex.  So the choice Sprott offers silver producers is simple:

Trust the CME/Comex following the MF Global affair, or trust Sprott Asset Management’s viable $10 billion enterprise, which sports a healthy premium to NAV as proof of his reputation and massive customer base.  Sprott is telling us that he’s positioned to make a market beyond the retail end of the business.

And, on the buy side: How likely is Celente, or anyone who read his shocking tale of how he was robbed by the U.S. financial system, to initiate future delivery of bullion (or anything, for that matter) from an obviously dysfunctional and criminal clearing operation at the CME/Comex?  Moreover, wouldn’t a declining base of buyers in the futures market ease JP Morgan’s naked short selling operation that much more, suppressing prices to its legitimate commercial accounts?

Now comes in a big buyer of silver; he wants to buy the metal but doesn’t want to take delivery though the Comex in fear of being ripped off like some rube taken in by the Nigerian bank scam that’s now moved to the Comex.

Sprott has a solution.

“In my ideal, we get a couple of institutions come in here and say, ‘Hey we’d like to take down a couple of hundred million bucks worth of silver, we love your vehicle,’” Sprott added.  “And then we might go and say, ‘Okay, I think it’s time to go out there and go raise some money to buy silver.’”

And to mitigate the effect of an escalating premium this ideal couple hundred million ounce order would have on the NAV premium to the small buyer, Sprott can raise the money through a Letter of Credit in conjunction with an assumed wide premium take down available to him from selling some PSLV shares to raise cash, arrange delivery from the producers (who have by then ‘invested’ in silver), and the deal is made.

Everyone’s happy, except the Comex.  Big buyers get a deal from NAV premium, producers don’t lose sleep, and small buyer aren’t hurt by the sudden volume.

“I’ve always stated that I’m not going to do anything that would negatively affect the premium of that fund,” Sprott reassured investors, as these silver aficionados know soaring silver prices also ratchet up PSLV NAV premiums, a complaint voiced on the Internet from time to time.

And as far as the timing of such a price-popping event?  Sprott won’t venture to say, or isn’t telling.

“So we’ll just have to wait for the right time and who knows when it happens?”  added Sprott.  “Maybe we have to imagine that the silver price is moving up, which we haven’t been in that environment recently, but the interest can come back very quickly.”

Sprott’s plan is a win-win-win proposition for investors, producers and him.

Expect registered silver at the Comex to dwindle now that MF Global has done its job chasing participants from this tiny marketplace.

Who’d imagine that another Son of American Liberty would come from a profiteering billionaire from Canada?  Marquis de Lafayette Sprott has come to the aid of America once again.

“Holy Jeepers,” Sprott to Buy $1.5B of Silver Bullion!

The silver price could explode higher in coming months.

As the silver and gold price predictably fade ahead of option expiration, JP Morgan’s bullion manipulation scheme could be headed for unprecedented problems, not from the record purchases of gold and silver from the Chinese, Indians or Russians, but from one Canadian billionaire.

Canadian-based Eric Sprott Management CEO Eric Sprott filed a follow up prospectus for the purchase of an additional $1.5 billion of silver bullion to cover expected demand for the company’s exchange traded fund, PSLV.  Sign-up for my 100% FREE Alerts

Combined with the recent decline in the PSLV premium to spot silver to 14 percent from the typical 20 percent, along with Sprott’s reported sale of some of its holdings of PSLV at the rich premium, it appears a familiar hallmark of a gigantic $580 million silver bullion purchase in December of last year emerges once again.  Since demand for silver products at Sprott remain brisk, it should come as no surprise to the silver world that Sprott needs more silver.

Yet, only two Web sites mention the breaking news, The Globe and Mail and bullion market reporter Harvey Organ,  Don’t expect Eric Sprott to herald the milestone purchase; he’s trying to avoid investors front running the purchase.

“Since Sprott filed its prospectus last Friday, PSLV units have come down 12 percent, while the price of silver has dropped only 6 percent,” stated Canada’s daily newspaper, The Globe and Mail, on Nov. 18.  “Whether or not the new filing is the root cause of the difference doesn’t affect Mr. Sprott much. He has been selling his PSLV units for most of the year (as documented by kid dynamite.)”

Because Sprott today represents ½ the size of the Hunt brothers wallet and their attempt to corner the silver market in 1979-80, nimble investors have taken advantage of the bulky Sprott in the past by front running his purchases, as his size and legal entity requires him to file with Canadian regulators—an issue he laments of during his interviews.

But for silver investors, the regulation could be a boon to the silver price, as the last time Sprott needed substantial inventory, the silver price soared 177 percent, though Sprott’s purchase cannot directly be proven to be responsible for all of that monstrous move.

However . . . more than four years earlier, in April 2006, prior to the launch of the NYSE version of PSLV, the Barclay’s iShares Silver Trust SLV, spot silver at the COMEX more than doubled at its price peak leading up to the launch of the SLV to $15 from $7.50, as late as September 2005—a double within six months, or a 200 percent ARR.

Moreover, further evidence of a coming silver price mega pop may be gleaned from the exciting silver rally of July 2010 to April 2011.  That monstrous rally could easily be rivaled soon, as Sprott apparently gears up for a whale of a purchase, $1.5 billion of silver bullion—a nearly three times last year’s $580 million purchase and coincidental 177 percent explosion of the silver price.

“Today the Globe and Mail announced Eric has filed a short form follow up Prospectus for a billion five physical silver,” respected bullion market blogger Harvey Organ wrote in a Nov. 21 post.  “holy jeepers, it could be approved in as little as two weeks people tell me, and he can trigger it OVERNIGHT without warning. Just bang, if he has got the orders. WE all know what happened with his last Physical Silver Issue, it was 580 million and blasted Silver 18 to 50 bucks in 5 months.”

Considering the fundamentals underlying the raging bull market in silver and the confident predictions of, in some cases, another double in the silver price, at least, by spring from industry peer James Turk of Goldmoney, as well as other hard money heavyweights, Ben Davies of Hinde Capital, Jim Rickards of Tangent Capital Markets, Euro Pacific Capital CEO Peter Schiff and QB Asset Management Co-founder Paul Brodsky, it appears the industry insiders to the tiny world of silver anticipated Sprott’s need to replenish—and when Sprott needs silver look out.

Eric Sprott: Another Lehman “almost has to occur”

Little did Sprott know at the time of his latest interview, it appears the triggering event took place early this morning.

Speaking with Goldmoney’s James Turk in Munich, Eric Sprott warned of another Lehman-like event stemming from the European debt crisis, which this morning took a definitive leap forward toward Sprott’s prognostication. Sign-up for my 100% FREE Alerts!

As the bellwether 10-year Italian bond blew through 6 percent on Monday, now through 7 percent, to 7.46 percent, this morning, it appears that the ECB has either given up on containing the contagion through its Italian bond purchases (as it had threatened on Monday), or worse, has been active in the market but cannot stem the avalanche of selling.

It was all CNBC has been talking about this morning, with an audio track from the movie “Godfather” playing between commercial breaks to add to the morning discussion.  Jim Rogers was there, too, providing commentary and his usual straight talk.  Rogers reminded viewers he’s short European stocks while the CNBC bugs flashed big red down arrows.

Like Rogers, Sprott doesn’t believe the banks balance sheets in Europe.

Sprott points out the obvious to those familiar with the bogus accounting out of the European banking system (and U.S. system).  Aside from the tier-3 assets (derivatives) not accurately reported by the banks, the tier-1 assets-to-equity that is reported reveals that European banks are grossly more leveraged than the US banks were prior to Lehman’s collapse.

“The level of derivative that are not even on the [banks] balance sheets is staggering.  So even if you’re looking at 20-to-1 you don’t even know if it’s 20-to-1 anyway.  It could be 50-to-1,” Sprott said, whose estimate may in fact be true given how net exposures turn into gross exposures at time of an event, to wit, Dexia and MF Global.

And Barclays Capital agrees, whose latest communique suggests that due to the collapse in Italian bonds this morning, “it seems Italy is now mathematically beyond point of return.”

Barclay’s reasoning is simple, it stated after the close of trading Tuesday, “Simple math–growth and austerity not enough to offset cost of debt,” and “reforms . . . in and of itself not enough to prevent the crisis.”

And as far as the EFSF backstopping Italy (if it can actually get funded), Barclays states, it’s “not adequate,” anyway, a conclusion FX Concepts John Taylor had drawn during the summer.

What to do? Zerohedge wrote, “Hint: Not good.  Sell euro, buy gold.”

Back to Sprott, who said on Financial Sense Newshour on Oct. 19, gold has been the de facto reserve currency during the ongoing crisis, as its price has appreciated in all currencies since the Lehman meltdown three years ago.

“The markets have made gold the reserve currency.  That’s what I believe, that’s gone up 100 percent against every currency in the world,” Sprott explained.  “So, it is the world’s reserve currency, as far as the markets go.”  “And as an offset to that, gold is not going to be a reserve currency without silver playing a hand here.”

Fast forward back to the Turk interview, Sprott, when asked about the possibility of another Lehman-like moment, Sprott said, “it almost has to occur.”

Sprott’s expected falling dominoes could be in motion now.  It appears market maker LHC.Clearnet has become a little nervous about its clients holdings of European debt, issuing a notice on Nov. 8 to holders of Italian 10-year debt of a deposit hike to 11.65 percent, from 6.65 percent.  After today’s rout, which by the way, has inverted the Italian 2y-10y yield curve for the first time throughout the 20-month drama (as Greece debt had, and is), we suspect LHC will issue further notices.

Silver Price much too Low, Eric Sprott

Nervous about the silver price during the worsening global economic slowdown?  Don’t be, according to Eric Sprott, CEO of Canada’s largest independently-owned securities firm Sprott Asset Management.  Silver (and gold) have become de facto reserve currencies, according to him.

In the silver market, “we’re going hand to mouth these days,” Sprott told listeners of Financial Sense Newshour.  And Sprott, of all people, should know; the last significant order placed in the open market by his firm in late 2010 took three months to arrive, he said, “and some of the silver that was delivered to us was manufactured after we purchased it.”

Following the massive ambushed on the silver market by Fed proxy JP Morgan during the month of May, Sprott, has noticed a radical change in the dynamics between the paper market for silver and the physical market for the white metal.

“The physical market is what I analyze more than anything else, and all I see is buyers,” Sprott said, at which point FSN host James Puplava chimed in, “That’s what the dealers are telling me.”

In the past, a Fed ‘take down’ caused demand for physical to cool significantly.  Today, however, typical supply/demand norms have been righted—that is, lower prices increase demand and visa versa.  In other words, the silver market has become functional through its physical market participants.

“It was very convenient for central bankers and governments, the price of gold fell off exactly as Europe hit its sort of peak in risk of the financial arena in the sovereign thing,” Sprott mused.  But, this time, the Fed-led take down of silver and gold prices revealed a large crack this time in its scheme to suppress precious metals demand in the physical market.

Sprott suggested that the evidence gathered from buyer demand in physical bullion at his firm, and others he deals with, has led him to conclude that gold has finally taken on the role as the preferred reserve currency, a conclusion also drawn by Grant’s Interest Rate Observer author and publisher James Grant, World Bank President Robert Zoellick, Euro Pacific Capital’s Peter Schiff, as well as bullion experts James Sinclair and Goldmoney’s James Turk.

“The markets have made gold the reserve currency.  That’s what I believe, that’s gone up 100 percent against every currency in the world,” Sprott explained.  “So, it is the world’s reserve currency, as far as the markets go.”   “And as an offset to that, gold is not going to be a reserve currency without silver playing a hand here.” Get my next ALERT 100% FREE

If an investor takes a three to five-year horizon of the silver market, according to Sprott, the historical ratio between gold and silver of approximately 15:1 (a geological observation of relative scarcity of earth deposits) will, again, be achieved as investors realize that a decision to buy precious metals to offset ongoing devaluation of fiat currencies across the globe will more likely favor the relative cheaper of the two metals to the other.

Moreover, as Sprott points out, mining production statistics throughout recent years reveal a decline in the historical ratio of availability between silver and gold ores.  Today, it appears that the ratio has been stuck at approximately 10:1 for some time now, suggesting to some analysts that maybe ‘peak silver’ is upon us.

“So why should it trade to a 50:1 multiple?” posits Sprott. “Give it three to five years; we’re going to get back to ratios which are way more appropriate to the underlying fundamentals of gold and silver.”

At today’s gold price, a reversion to the historical norm calculates to a silver price of $110, or a whopping 70% discount to today’s $32 price tag, under the Sprott thesis.

As approximately 57% of the world’s GDP, that percentage, which is the combined GDP of the U.S., EU and China, appears to be collapsing—again (see IMF), a well-founded sense of gloom for a coming worse economic time has gripped global markets rather quickly, creating fear of another Lehman-like unwind of money flows out of dollar and euro-denominated assets, back into those currencies, which could, then, take down the precious metals complex.

Sprott believes that argument will ultimately prove to be a specious one, a throwback to another time when the U.S. dollar (and euro) was readily accepted as a reliable medium of exchange.  Today, investors should, instead, focus upon horrendous supply constraints and mushrooming investor demand, driven by eroding faith in the both the dollar and euro.  Violent short-term swings shouldn’t dissuade investors from holding silver for a three to five-year outlook, according to Sprott.

“God forbid that we actually end up with a seriously declining economy,” he said facetiously.  “Because if you think it’s bad for banks, today, wait until you have to deal with a couple years of negative GDP growth and what happens to value of those paper assets that they own.”

Sprott added, “The ultimate destiny for gold and silver is that people will prefer to own those investments rather than have money in the bank.  And there’s a lot of money in banks.  People don’t yet perceive that gold and silver are the superior investment, but in my mind they are.  Because when you have money in the bank, there is tremendous counter-party risk.”

Counter-party risk?  That’s a Goldmoney’s James Turk’s theme—a theme, Turk believes will seep into investor consciousness over time, catapulting silver to phenomenal heights in the coming years.  Ditto for Eric Sprott, who said in a MineWeb interview of April 5—“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.”

Eric Sprott: “Silver is the investment of this decade”

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.