A question and answer session with hedge fund manager Eric Sprott:
Are we near the bottom of the decline in gold and what timeframe do you see for its appreciation to reach the old highs and possibly push through to new highs? Craig
Craig, I firmly believe that we reached the bottom on June 28th and that gold should double from that bottom within the next 12 months. So by next summer, I think that the price of gold will have made new highs and stand around $2,400 per ounce.
What is your view on the junior mining and exploration space? What has to occur in the mining sector to see a turn-around in the junior space? Anonymous
Given my outlook on gold prices, this sector will be explosive. The continuation of the gold bull market will lead the junior gold mining stocks higher by many hundreds of per cents, just like it did during the 2008 recovery. By the way, since hitting the bottom on June 28, gold has rebounded by 12 per cent while gold miners have gone up by about 25 per cent.
Hello Mr. Sprott, I think your analysis of what is happening with fiat currency is bang on. I am wondering how do you think the U.S. Government can ever get out of this catch-22 they are in with their debt? If they let the interest rate rise by stopping QE (quantitative easing) then they will pay more interest on their debt. If the pay more interest on their debt, they will have a bigger deficit. Will they print money until the reset button is pressed? When? What will that mean for the average Joe? Kyle Brown
Mr. Brown, you are exactly right, and this is why I think that the Fed will remain accommodative for a very long period of time. However, the official debt is only the tip of the iceberg and, as we discussed in the most recent Markets at a Glance, longer-term benefits such as social security and medical care will have to be cut as well. The promises made by governments are too generous and cannot be kept. Not just for the average Joe but for everyone, I think we should expect less from the government and prepare to fend more for ourselves. Money printing can hide financial problems for a while, but it can’t provide tangible services to citizens.
Why do you think the bullion banks have so consistently shorted the gold market? Were one or more, in your view, acting as agents for the Fed to prevent gold from being seen as a secure store of value and a preferred alternative to the U.S. dollar? Do you have conclusive evidence to back your opinion? Derek White
Mr. White, there is strong evidence that Central Banks have surreptitiously colluded with bullion banks (see our Sprott Thoughts article on the topic here) and sold their gold in the market. This is further evidenced by recent comments at the Bank of England and the ridiculously long delays to repatriate German gold from the U.S. Furthermore, I would refer you to the Gold Anti-trust Action Committeewebsite, which discusses those issues at length, and our Markets at a Glance article series “Do Western Central Banks Have Any Gold Left???”. (Part 3 can be seen here.)
Some prominent analysts claim that the Commitment of Traders reports from the U.S. CFTC are giving very bullish signals concerning the future direction of gold and silver prices. Do you agree– and why or why not? Andrew
Yes, I agree with this analysis and further details can be found in my recent article here. Basically, we have seen a complete reversal of the situation in the futures market: commercial dealers covering their shorts, speculators selling (going short), and most importantly, COMEX inventories declining. The most important part of the equation is the covering of shorts by commercial dealers. That means they are no longer supplying (paper) gold to the market, which was depressing the price.