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Sprott describes his metal investment strategy, calls silver 'the big play'

Section: Daily Dispatches

8:41p ET Saturday, July 25, 2020

Dear Friend of GATA and Gold:

In his weekly interview with Craig Hemke of the TF Metals Report for Sprott Money, mining entrepreneur Eric Sprott covers some fascinating ground.

Among his observations:

-- The monetary metals mining shares underperformed metals prices this week, perhaps because the general equities market did not do so well.

... Dispatch continues below ...


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-- But as earnings season begins, substantial increases in earnings are likely to be reported by mining companies amid the strong rally in gold and silver prices.

-- Huge amounts of metal have been reported as acquired by the silver exchange-traded fund SLV and open interest in the gold and silver futures market is not increasing, indicating that banks are reducing their shorting, realizing that the metals trains can't be stopped.

-- Normalization of the gold-silver ratio implies a massive increase in the price of silver, and thus silver is "the big play" now.

-- While investment advisors recommend that investment portfolios hold a 5 percent component in the monetary metals, the mining industry cannot increase production fast enough to accommodate much acceptance of that recommendation without causing a big increase in prices. The mining industry, Sprott said, can increase production at most by 1 1/2 percent per year.

-- He will start selling his gold and silver positions when better opportunities for investment develop. By example, he said that if the mining industry had a price-to-earnings ratio of 50-1 and utilities had a ratio of 15-1, it would be a good time to rotate into utilities. (He did not seem to think that was likely to happen any time soon.) He said he reduced his position in Kirkland Lake Gold, a company he helped found and whose shares have increased in price by more than 1,000 percent, because the company had realized most of its innate leverage to the gold price and more leverage was available elsewhere.

-- He identified his favorite silver mining company but learning its identity will be your reward to listening to the interview yourself. Why should your secretary/treasurer do all the work and rob Sprott Money of more of the traffic? Besides, you'll greatly enjoy this one.

The interview is 26 minutes long and can be heard at Sprott Money here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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