Sprott's Embry warns investors to make sure ETFs backed by precious metals

Investors should confine their exposure to actual physical metal or only to paper products with regular audits that support precious metals backing.

SPOKANE, WASHINGTON - 

As precious metals investment demand "is exploding on a worldwide basis," Sprott Asset Management Chief Investment Strategist John Embry urged investors to make sure "your exposure to gold and silver is what it is represented to be..."

"Very simply there are far too many proxies for the real thing," he warned retail and institutional investors at the Silver Summit in Spokane Thursday. "Thus I would confine my exposure to actual physical or only those paper products where a regular audit is conducted to irrefutably support the precious metals backing."

Nevertheless, Embry feels "gold and silver have presented remarkable refugees" during the current global economic crisis.

"The gold price to date represents just the tip of the iceberg," he stressed.  "What is truly important at this moment is to have a good position in gold and silver and their respective shares."

"I'll stick to a target of $1,500 in the next six months but I am comfortable with the notion of it trading at several multiples of the current price before the bull market runs its course."

Meanwhile, Embry asserted, "I cannot over emphasize the magnitude of the impact that is going to be felt in the gold market when central banks can no longer supply the gold needed to meet burgeoning demand." The decision of central banks to accumulate 14 tonnes of gold during the second quarter of this year is evidence of the possibility, he added.

"Most observers do not realize how much central banks...fill the huge and growing gap between true demand and mine and scrap supply," he noted. Embry estimated the size of demand-supply gap exceeds 1,000 tonnes of gold per annum, which represents 25% of the physical gold supply.

The gap "virtually guarantees that the western central banks are getting dangerously short of available reserves...to continue dumping gold on the market," he suggested. In the meantime, a number of eastern central banks-who are awash in U.S. dollars-"are accumulating and will continue to accumulate gold as one avenue to diversify their resources away from the U.S. dollar."

Meanwhile, Embry forecasts that the gold-silver ratio, which is currently just under 60, to decline precipitously as the bull market in precious metals gathers steam."

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responses to this article

Gold and Silver I agree with Mr. Embry. I also believe that only Gold and Silver are actually Money. by energystar1 on September 25 2009, 14:03 Find this comment inappropriate? Report it

Jim is Absolutely Correct Did Jim say that central banks plug the gap between actual demand and supply from all mines by as much as 1000 tons of gold per year. That is huge!!!!! The world is getting dangerously short of gold. Jump on board the gold train before . .more gold explodes over 1050 US per ounce. We place authorities about gold on our website, and Jim Sprott certainly fits the bill, so I will shortly be putting this article us on our independent Gold site www.goldsurvivalguide.co.nz . .less by David Deutsch on September 25 2009, 16:13 Find this comment inappropriate? Report it

Gold Rare? Gold isn't rare. Most of what has been mined in all of history is still around. It's just being hoarded by more people in greater quantities now. With the devaluation of all currencies, everyone is going to clambor for gold. Silver is the real money . .more maker though. Most people aren't even aware of the fact that in 15 or 20 years all the silver that can be mined will have been mined and silver is used everyday in applications where it can not be recovered. . .less by Ag on September 28 2009, 18:54 Find this comment inappropriate? Report it

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