Markets at a Glance from Sprott

The latest commentary is out by Eric Sprott. He believes that many commentators have failed to recognize that silver has shifted from a industrial to a monetary play and hence the value could go much higher. He notes that most analysts have a target around $29.50 for 2011 and drop down near $20 in the next couple years but if silver has become more a monetary play these values may be way off.

He notes that for 2010 silver production was 951 million oz (including scrap), and 139 million for gold. This is a 9:1 ratio but the current ratio is 35:1 in valuation. He see’s the gold/silver ratio continuing down to 15:1 as it has been for hundreds of years prior to the 70′s and also represents the ratio of gold/silver on earth. He also notes that for every $1 going into gold, $1 is going into silver, this can’t continue with the above ratio’s without dramatically affecting price. Also if you take out the 600 million oz of silver used for industrial and the 13 million oz of gold the ratio goes from 9:1 to 13:1 yet dollars are flowing equally into each metal.

Another ratio he shows is investories, 1.2 billion oz of silver to 2.2 billion oz of gold, a ratio of 1:2, OR $52 billion worth vs $3.3 Trillion, a ratio of 63:1. This would seem to indicate that a much higher price is in store at some point.

See full interview here.

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