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John Embry - Silver Market Extraordinarily Tight, Look for $125

May 24, 2011

With gold and silver on the rebound, today King World News interviewed John Embry, Chief Investment Strategist of the now $9 billion strong Sprott Asset Management. When asked about gold breaking out in Euros and the Pound Embry stated, “I think it’s very significant. I mean the fact that they held it (gold) in Euros there for weeks, but now I think the problems in Europe, in the periphery are becoming so apparent and the anger is starting to really rise to the surface, they are basically spurring buying in these countries.”

Embry continues:

“People are feeling more comfortable protecting themselves with things like gold. I think it is significant that it (gold) has broken out here in Euros and in the English Pound and I think it will break out to new highs against the US dollar before this move is over.”

When asked about the action in silver specifically Embry remarked, “Let’s face it, silver needed a correction because it had gone up in almost a straight line and people were talking about parabolas and what have you. But the correction was amplified by the CFTC allowing or sponsoring five margin hikes in eight days. Every time the price was getting pounded they put in another margin hike, so anybody that was long and didn’t have extraordinarily deep pockets had to puke the position.

But I think the most interesting comment someone said was, ‘You know in the long-term move in silver this will look like the blip in the ’87 stock market crash.’ Then, as you know, they killed it (stocks) in ’87 and the stock market proceeded to go up 5 or 6 fold. I think silver will do exactly the same thing. It’s irritating if you’re long on margin because you are going to get kicked out of the position, but if you know the game, it was just another opportunity to get some cheap silver.”

When asked if there was still tightness in the silver market Embry replied, “As far as what we look at, my partner Eric Sprott, he thinks the market is extraordinarily tight. I think one thing people are underestimating is the investment demand. This is being triggered by the high gold price which is driving the little guy into silver for the simple reason that he can’t handle how much it costs to get an exposure in gold, so he buys silver.

So I think this will be an ongoing phenomena and when you put that together with the strong industrial demand, the two together will drive silver much higher. I think the optimists that are talking about the gold/silver ratio declining to historical lows of 10 to 15 times could well be right, and given where I think gold is going, I mean that has an enormous upside potential for silver.

...Well let’s say gold goes to $2,500 which I don’t think is an outrageous statement in the face of what is going on, and the gold silver ratio falls to 20 to 1, well that puts silver at $125...People that were top-calling in silver and gloating when it got taken to the cleaners, I don’t really think they really understand the dynamics of the market.”

When asked if he thought James Turk was correct in his KWN interview where he discussed this summer possibly being a repeat of 29 years ago when gold had a massive upside move Embry said, “Absolutely, and the fact that everybody is sort of trying to put a seasonal spin on this that gold is sort of weak...I think they could get blindsided and that James Turk could be very right on that call.”

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/5/24_Embry_-_Silver_Market_Extraordinarily_Tight%2C_Look_for_%24125.html