John Embry - This Is Why Silver Will Smash Through $100

Today John Embry spoke with King World News about why the price of silver is going to smash through $100 and what the Chinese are up to in critical markets.  Here is what Embry, who is chief investment strategist at Sprott Asset Management, had to say:  “The central planners recognize that the whole system is based upon keeping the collateral that’s supporting all of this debt elevated.  Consequently, if gold and silver were to suddenly start to rocket up in price and truly reflect what’s going on, interest rates would follow briskly behind them and the whole bond market would literally collapse.”

John Embry continues:

“If that took place it would put enormous pressure on the banking system and we would see total chaos.  So the powers that be are going to fight this tooth-and-nail, but unfortunately for them they are losing in the physical market.  Gold sales from the US Mint have been exploding since Obama was reelected, and yet the paper price is actually down.

So what does that tell you?....

“I mean it’s a totally fraudulently price for gold we are seeing and it can only go on for so long.

And when it comes to silver, I’m extraordinarily bullish on silver in terms of both the supply and the demand side.  As the metals really begin to run, the average person will focus their investing on silver.  So the masses will come into the silver market.

The other thing which is fascinating about silver is that unlike gold, which isn’t useful for much other than hoarding and jewelry, silver has a number of uses.  I was interested in Stephen Leeb’s comments about photovoltaics and how much silver production will be required in coming years.  

He might be a little optimistic on the amount that’s going to ultimately be used in photovoltaics, but the fact is there are an enormous number of new applications for silver including medical and solar.  What is fascinating is it wasn’t that long ago that 33% of silver demand came from photography.  Now, virtually none does and it’s all been replaced by these high tech applications.  

The other things that was interesting is that a large proportion of photography use was recycled.  Today, I don’t think nearly the same amount is being recovered from these high tech applications.  So when you combine both investment demand and industrial demand, the silver is just not going to be there to satisfy demand at current prices.

At the same time we have consumed an enormous amount of above ground inventory over the last 50 years, so clearly demand was wildly outrunning supply and I don’t see any new sources of supply.  The fact is that 75% of silver supply comes as a byproduct of base metal production.

If the global economic prospects are as bleak as I believe they are going to be moving forward, the demand for base metals will drop and a number of mines with base metals will close.  So I see actual mine supply for silver falling in the next five years.

I don’t see any negatives in the silver story whatsoever and I think the price is going to go to at least triple figures in the next couple of years.  We will also see the gold vs silver ratio heading towards the historical ratio of 10/1 to 15/1.  That is going to shock a lot of non-believers.” 

Embry also added: “As a matter of interest, I loved that chart that Egon von Greyerz provided to KWN on Friday which showed the longer-term perspective of Chinese gold demand.

These guys know perfectly well what’s going on and they invented paper money.  The Chinese know this experiment in paper money has a finite life and so they are getting all of the gold they can get their hands on right now and they are going to back their currency with it.  But in the end, I don’t know what the hell the Western interests are going to do because our vaults are being emptied.”