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 SilverSeek.com.
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.”
Related: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), ProShares Ultra Silver (NYSEARCA:AGQ), ProShares UltraShort Silver (NYSEARCA:ZSL), iShares Gold Trust (NYSEARCA:IAU), Sprott Physical Gold Trust (NYSEARCA:PHYS).
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