SGM Metals: Sprott 'Gold/Silver Price Ratio @ 50/1 Yet Buying is @ 1/1'

Dec. 9, 2011 - PRLog -- mineweb.com speaking w/ Eric Sprott on the OPEC style union proposed to silver miners reports: [ Silver producers are being held hostage to the paper silver market, says, Eric Sprott, Sprott Asset Management CEO.

Asked whether or not he has received any feedback from the producers on his suggestion that they "reinvest 25% of their 2011 earnings back into physical silver," Sprott said that there had been a groundswell of interest - more than he had ever seen before - but that still more needs to be done.

Sprott says that the idea stems from two factors currently at play within the silver market: the first is the general weakness seen within the global banking system, the second is the level of volatility in the system.

This frustration is made all the more acute for Sprott because of the strong underlying story he sees playing out in the physical market. Currently, he says, there is nothing in the macroeconomic environment that would lead him to think that people don't want to own physical silver. Over the long term Sprott believes that he market has made gold the reserve currency.

"I don't care whether the central banks have or governments have, but the markets made it the reserve currency... central banks have been aiding and abetting that process - they're almost making it the reserve currency by their actions, not by their statements and when it was a reserve currency silver traded at a ratio of 15 to 16:1 of the price of gold."

Over the shorter term, he says there is clear evidence of strong demand for the metal, "demand for silver is versus the demand for gold in the investment arena and when I see people like Gold Money sell as many dollars of silver, as gold.  When I see the US Mint sell as many dollars of silver as gold which by the way implies in both instances, 50 times more physical than gold.  And when we did the IPO for Gold Trust we made $440 million.  When we did the IPO for the Silver Trust we made $550 million...Well how can the price be 50:1 when the money is going in 1:1?" ]

Remember that last year around this time Eric Sprott made a huge silver purchase for his fund and the price of silver during this period shot up from the low $20’s to the record high of $50 per ounce. Now he has outdone his previous order with a $1.5 BILLION/45 MILLION OUNCE purchase of silver bullion. Imagine what impact this can have on the price of silver comparatively speaking to last years purchase . . . . This year we are also watching the possible dismantling of the European Union that could play out in the very near future. I could only imagine that when this day arrives we are sure to see European bank runs as citizens try desperately to get their money out of the EU banks that are buried in the very European debt that will be defaulted on as the PIIGS nations are ejected from the financial union. Should this be the case this can easily morph into a flight to quality panic that will surely see the precious metals become the favored choice of those who are looking for stability in a very unstable scenario.

The world is now finding out what was thought to be a $787 billion dollar bank bailout has now been discovered to be more in the neighborhood of $7.77 TRILLION bailout and this is unnerving those who are concerned with inflation and for a good reason. This is in combination with an additional $16+ TRILLION bailout provided by the FED to the European banks. Also in addition to the Federal Reserve’s press release announcement that came Monday that the FED in a coordinated effort along with 5 OTHER central banks of the world will be providing UNLIMITED USD loans to the European banks THROUGH 2013! If there was ever a hint of desperation in the air that should encourage investors to take a step back and recognize a potentially catastrophic scenario that might warrant some risk hedges in hard assets with intrinsic value, this would be it. Establish your disaster hedge in gold and silver today as the herd can be spooked at any moment and the panic flight to quality might take the very affordable entry into precious metals into the stratosphere.

Never did we imagine the very real threats that are materializing everyday would ever be witnessed in our lifetimes. When the day arrives when you see the US government pass the NDAA S-1867 National Defense Authorization Act 2011 by a vote of 93-7 that allows land of America to be deemed a “Battlefield” in the ‘Global War on Terror’ you better take notice of the slippery slope we are on. And when this bill allows US citizens to be deemed ‘enemy combatants’ and the bill of rights magically fades away, you better take note. When the 6 biggest central banks of the world announce a group effort to saturate the entire continent of Europe with UNLIMITED USD loans through 2013, you better take note. At least accept that the system is putting place contingency plans ‘just in case’ the global markets collapse. What is your ‘just in case’ contingency plan? If it’s not physical gold & silver you might want to go back to the drawing board.

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SGM Metals strives to offer not only wealth preservation precious metals investments to offset weakness in the economy, but to help educate our family of clients to better identify the threats to their financial security.