Dive in Silver Price a “Setup,” Says Sprott

Eric Sprott is CEO of Sprott Asset Management and a long-time proponent of owning both gold and silver. He is also a long-time proponent of the belief in the conspiracy theory whereby large financial institutions are colluding to drive silver prices down, as when prices fell from around $50 to $32 an ounce in May. “In my heart of hearts I believe it was a manipulation,” said Sprott in an exclusive interview with Silver Investing News. “There was no market, it was a setup. They’ve just pushed it down. It’s ridiculous.” The recent price correction has largely been attributed to the increased margin requirements from the CME group. Between April 25 and May 5, COMEX increased silver margins to as much as 12 percent – or $21,600 per contract – from 6 percent, before silver tumbled 25 percent. “China was closed, the UK was going to be closed that day, it was at the quietest time in the market and we all woke up and ‘bang,’ we had margin call,” said Sprott. “One of the most famous saying in the business is: never meet a margin call. Don’t put up the money, just get outta Dodge. This creates selling.”

Regarding who exactly is responsible for this manipulation, Sprott says that he believes those who initiated the recent drop in silver were large financial institutions unsatisfied with their current volume of holdings. “We all suspect they’re the same guys that are mentioned in the 2008 lawsuits against the two major players in the silver market,” he said. “The guys who were short who were getting killed were losing huge amounts of money, so it was a perfect time to do something.” Sprott is referring to two separate lawsuits filed by trader Peter Laskaris in federal court against JP Morgan Chase & Co. and HSBC.

“A lot of that QE1 and QE2 are giving a tailwind to gold and silver. If you want to tell me there’s going to be a QE3, I’m going to tell you silver will hit $50 before we even know it,” said Sprott. “I’ve always publicly stated that it will trade at a range based on the gold price of 1/16 of the gold price, that’s what I think it historically was always at and I think it will go back there. The charts tell you that” “It’s hard to make a call on where for sure all these things are going to go because we don’t know what the next ridiculous policy on the part of central banks and governments are going to be,” he said. “Silver and gold are competitors to fiat currency. They’re competitors and for the capitalist system to function, people have to trust currencies.”

Link...