Articles & Blogs - Gold Commentary

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Eric Sprott, founder of Sprott Asset Management, and one of the most respected money-managers in Canada has a very simple philosophy for his clients these days: go “long” on precious metals, and “short” everywhere else.

In an interview for reportonbusiness.com, he stated that his pessimism is based on two factors. First, he sees complete futility in the U.S. government's efforts to prevent “the logical outcome” of the bursting of the U.S. housing bubble and concurrent collapse of credit markets.

Furthermore, in attempting to fight the “forces of nature” he is frightened by the “irresponsibility of the monetary authorities”. Sprott frankly admits he can only guess at whether the attempts of the U.S. government to inflate markets will work – at all.

He sees the attempt to inflate U.S. financial (and equity) markets as “a game” being played by the U.S. government instead of trying to FIX the U.S. economy. Consequently, he doesn't see anything being fixed.

The “best-case” scenario he sees for the U.S. is a “divergence” in the U.S., where some (paper) assets become inflated from the tidal wave of new, money-creation – while the U.S. economy itself continues to disintegrate. In this climate, Sprott is only certain about precious metals, while he studies “every piece of information” to determine whether or not to continue shorting.

For those frightened away from precious metals due to the propagandists warning that that they will not do well in a “deflationary environment”, keep in mind that one of Canada's most successful investing “guru” is holding precious metals (for himself AND his clients) regardless of whether inflation of deflation dominates in the U.S.

The people warning us away from precious metals are the same people who have been wrong every step of the way, and “surprised” by all these events. While I'm holding precious metals based on my own analysis of events, I'm comforted to be “in the same boat” with astute minds like Eric Sprott's.

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