Sprott Says U.S. Depression Will Double Gold Prices
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Eric Sprott is a Canadian money manager who last year predicted banking stocks would collapse, said the United States is at the beginning of an economic depression that will could assist in doubling current gold prices.
Sprott, chairman and founder of Toronto-based Sprott Asset Management, told Bloomberg that he believes bullion may top $2,000 an ounce in coming years amid a series of financial catastrophes. Sprott thinks some of the catastrophes may include: banks having to replenish capital, Treasury auctions failing and the terrible economy creating a dire operating outlook for many companies.
"The trend is down, and there's not one signpost that says it's changing yet," Sprott said yesterday from Toronto. "We'll stand by to wait to see those, and until it does, you have to assume it gets worse."
Sprott still thinks investors should buy more gold stocks and bullion while selling the entire equity market short. He thinks the companies that are most at risk are banks, discretionary consumer stocks and any companies that have to refinance debt.
Sprott said he believes there's a chance that a U.S. Treasury auction will fail as countries use their resources to solve financial turmoil in their home markets, leaving less monies to help finance the US economy. Concerns like this have driven investors to buy stocks in the gold market.
For example, David Einhorn's Greenlight Capital hedge fund, has started building a position in gold stocks. Some of the popular stocks being bought in the gold sector, include: Yamana Gold (NYSE: AUY), Goldcorp (NYSE: GG), Newmont Mining (NYSE: NEM), Kinross Gold (NYSE: KGC), Barrick Gold (NYSE: ABX).
A couple of popular gold ETFs that could run are Market Vectors Gold Miners (NYSE: GDX) and SPDR Gold Trust (NYSE: GLD). If Eric Sprott is once again proven right, then buying one or a couple of the above mentioned stocks should allow investors to participate in Sprott's prediction.
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