2014 Is Going To Be One Hell Of A Year For Gold & Silver

Rick Rule, who is business partners with billionaire Eric Sprott, where he discusses what to expect in 2014, what investors should be doing with their money as well as what Sprott Global is doing with its own money right now.

Rule:  “We are at one of these wonderful places right now, coming off a bear market bottom, where there is liquidity in the market but things are still cheap as a consequence of a 75% decline on the Toronto Stock Exchange.  So this is a God-given moment in these markets.

You have an enormous amount of capital coming into Sprott from overseas.”

Rule:  “We have told those foreign partners that we would allocate the capital to these markets as the opportunities became available.  Fortunately, these are long-term investors with a long-term horizon.  I don’t want to tip my hand, but there are certainly stocks in this market that look attractive to us right now.”

“We have oil still trading over $100 a barrel, gold and silver have surged, and everything just consolidates the gains and moves higher.  Have commodities turned the corner?”

Rule:  “Well, I love the phase that you just used, which is that it looks as though these things ‘are just consolidating the gains.’  You have seen gold move significantly higher, and when gold moved down last week it didn’t break down.  In fact, it did just what you said, it consolidated the gains.  That is very positive action.

Markets move as a result of both supply and demand.  What has been very apparent to me is that demand for commodities on a global basis has been very weak.  As most of your guests have described, the economy is in fact very weak.  So this has not been a demand-driven market in commodities, but rather a lack of supply that has driven these markets.

If you look at the commodities like platinum, palladium, natural gas, uranium, zinc, etc., supplies faltered even in a bear market.  So we are also looking at those places.  But we are mainly attracted to precious metals, not because the stocks are cheap, but because they are reasonably priced today relative to other commodity prices.

The ability to buy high quality gold and silver equities when they are reasonably priced only occurs once in a decade.  In addition to that, we think that gold and silver prices are going to increase.  So we are fairly happy across the spectrum.  We have done more private placements in the first seven weeks of this year than we did in the last six months of last year.  Meaning, these are very favorable market conditions from our perspective.

Readers have to understand that it isn’t going to be straight up.  We are going to see volatility in these markets.  These stocks can go up 15% or down 15% sometimes for no reason whatsoever.  So while I strongly believe that you are going to see a rising channel, that is higher highs and higher lows, you are certainly going to see volatility.

Readers need to remember above all else to use this volatility as a tool and not to be used by it.  They need to understand that getting from February to December will involve lots of thrills and spills.  So they have to keep their seat belts on and have the cash and have the courage to stay their trade.”