Eric Sprott: Why a gold bug won’t throw in the towel – by Pav Jordan, Tim Kiladze, Jacqueline Nelson (Globe and Mail – April 17, 2013)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The biggest rout in gold prices in decades isn’t enough to sway Canada’s chief gold bull from his faith in the metal.

Eric Sprott turned his ability to call the gold and silver markets into personal wealth that once topped a billion dollars. His investment firm, Sprott Inc., has been hurt by gold’s recent plunge, but the company founder predicts gold will roar back and even hit new highs by the end of the year.

“I’ve always imagined that gold would hit a new high by the end of this year, over $1,900, so that is what I think,” Mr. Sprott said in an interview Tuesday, with gold bobbing below $1,400 (U.S.) an ounce.

Mr. Sprott believes the yellow metal is safer than paper money, which can be printed by governments. He backs that up with his own investments, saying a few months ago that he has about 80 per cent of his money in the precious metals sector.

“I think [gold] will end up for the year, just like in 2008 … because in a financial crisis, you don’t want your money in a bank,” he said.

He compared the current pullback to 2008, when the price of gold fell 30 per cent in eight months amid the financial crisis to $712 an ounce, only to rally to $873 by the end of the year and more than $1,900 by September 2011.

Mr. Sprott expressed his resolve for gold a day after prices nosedived nearly 10 per cent.

It was the steepest one-day decline since 1980 and sparked a broad selloff in Canadian gold mining stocks. The freefall in bullion prices – they have dropped 13 per cent in the past week – came amid bearish price forecasts, concerns the U.S Federal Reserve would ease its quantitative easing campaign, and fears central banks in Europe could sell gold to buffer balance sheets.

A turnaround in gold prices can’t come too soon for Sprott Inc. Several of the firm’s resource-reliant funds have posted lagging returns in recent years.

The company’s flagship mutual fund, Sprott Canadian Equity Fund, plunged 10 per cent on Monday, bringing the year-to-date loss to 27 per cent. The fund posted an annualized loss of 8 per cent for the five years to March 31.

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