Eric Sprott Sees 20%-40% More Gains in Gold and Silver Until the End of 2011 — Gold $2000 and Silver $50

Eric Sprott was interviewed on Yahoo! Breakout today, and was explaining why gold would reach $2000 and $50.

Yet again, Sprott made so many classic mistakes of investment management and judgement, that I'm getting very worried for his investors.

See below some selected quotes:

It's been going up 17% a year for eleven years now, so I would assume it will go up 17% this year. — That's the power of the markets and one of the biggest weaknesses of the human brain: take just a few data points, and extrapolate this into a line until the infinity. This kind of reasoning is very similar to the house prices that were supposed to go up 10-15% a year forever.

"The fundamentals are driving gold and silver: money printing by the Fed." — Any investor or analyst who doesn't understand the price action will justify it by saying the fundamentals are great. Silver is up 40% or so in a matter of 3-4 months. Anyone who explains short term market movements by saying how good/poor fundamentals are, doesn't get it. The fundamentals affect secular trends and are many years in the making. The fundamentals of silver haven't changed much since Jan.

"There's a lot of inflation" — Where? Compared to the 40% jump in silver prices in 4 months, retail prices are quite stable, wages are stable to down, money printing is not compensating for all the credit destructions...

"I've owned gold for 11 years, and I've never sold any of it".— Reminds me of people who owned their property for 11 years, and never sold it... We know how it all ended.

Enjoy the interview, and as usual, Caveat Emptor.


Anonymous said...

Of course Eric Sprott will talk up silver. What else do you expect? Sure 17% per year is unsustainable heck the 2% inflation target by the fed is unsustainable (goes parabolic after a few years as Mish shows elegantly). The only thing sustainable is zero inflation. Where are you going to get that with the central bankers running printing presses 24/7. So you say yes but it hasnt reached the general population as banks are not lending. Agreed. But lets see the Fed buys bonds from the big boys. Big boys dont go out farming corn or raising cows or making machines they pile into whatever the hot games are at the moment. Right now its silver, gold, oil, commodities, junk bonds etc etc. You know its not going to end well and I do too. But tell me what you want me to do with my savings? Every time we have central bankers and the govt sponsered bubbles. Just pile in my friend and keep raising stops so you wont get raped when the music stops. Sure silver will take a good correction soon. Just buy some more. What do you think is going to happen when we have a double dip from high oil, commodity prices? Suddenly Bernanke will stop printing and raise rates? Gimme a break. I agree with all your points. I also happen to agree with Sprott for now. Silver will see 50 and much beyond before all this insanity ends.

pej said...


Thanks for your comments and sharing your opinion.
Indeed, nobody can know where the top will be, as the madness of the crowds is limitless. It could very well go to 50 or 100, and also fall to 2 or 3 subsequently.