NEW YORK (Commodity Online): Silver turned out to be the hottest commodity among precious metals group in 2010. The bull run in silver is set to continue in 2011, prompting precious metals experts to suggest that the white metal will outshine other sister commodities like gold, platinum and palladium.
Eric Sprott, founder of the Toronto-based investment firm, Sprott Asset Management LP, says that silver is the most bullish among commodities in the world that the white metal will hit $50 in 2011.
In an interview to BNWnews.ca, Sprott said that investors should take note of the fact that silver will be the best investment vehicle for the coming decade>
Lured by the big potential of silver, Sprott launched launched the $575 million Sprott Physical Silver Trust in November, 2010.
"If the price of silver continues to go up, silver stocks are going to perform even better," Sprott said.
He pointed out that Sprott the big catalyst for surging silver prices in the coming years will be exponentially increasing investment demand, which is already beginning to overwhelm existing silver supplies.
“The mining industry only produces around 800 tonnes of silver per annum. This is a relatively inelastic supply, regardless of silver prices,” Sprott said.
"China's net imports of silver were 112 million ounces last year. In 2005, they were net exporters of 100 million ounces," he says.
"That's a 200 million ounce shift in an 800 million ounce annual market that seldom ever grows because production hardly ever goes up. So where's it all going to come from? We don't know."
In fact, silver promises to outshine gold over the coming years, Sprott says. "Silver is the poor man's gold. Gold has had a great run for the past 11 years. But I absolutely believe that silver will outperform gold this year. Currently, there's more investment dollars going into silver than into gold."
Such a game-changing scenario should recalibrate the gold to silver pricing ratio in silver's favor, thereby eventually restoring it to its traditional level of about 16 to 1, he says. "It's the easiest call of all time."
"Silver as a currency always traded in a ratio of around 16 to 1 compared to gold, when it was a currency in the U.S. and the U.K. The current ratio is 48 to 1. If we go back to a 16 to 1 ratio, the implied price for silver would be $85.62 (per ounce)." Sprott said.
"On that basis, if gold goes to $1,600, then that would value silver at $100. And we certainly think that gold is going to $1,600. In fact, I'm willing to bet that this ratio will overshoot on the downside. It might even get to 10 to one," he added.
