Eric Sprott: Sell-off In Gold Is Opportunity To Buy "At An Artificially Low Value"

Eric Sprott of Sprott Asset Management has penned his latest commentary entitled "Do Western Central Banks Have Any Gold Left???"  In it, he examines the selling pressure in gold recently, arguing that it's a great time to buy the precious metal.

Sprott notes that the supply of gold has pretty much remained the same, and that demand has steadily increased (thanks to India and China).  He also points out how central banks have been net buyers (instead of net sellers) of the precious metal.

He writes,

"Much ado has been made about the recent sell-off in the yellow metal forcing certain  ETPs to liquidate, adding a supply of gold into the market in the process. Our work  reveals that the previous ETP sell-offs, (which occurred in January 2011, December 2011,  May 2012 and July 2012) have all coincided with gold finding strong price support and  rallying higher."

Sprott concludes that this sell-off in gold is an opportunity to buy it "at an artificially low value."  While he does make some prudent points, it is worth highlighting, however, that Sprott has been a gold bull for quite some time.

Embedded below is the latest commentary from Sprott Asset Management: Do Western Central Banks Have Any Gold Left?





For more from this manager, be sure to check out Sprott's previous commentary: ignoring the obvious.

Eric Sprott's Latest Commentary: 2012 is Year of the Central Bank

It's been a while since we've covered Eric Sprott and his Canadian firm Sprott Asset Management. He's out with his February 2012 commentary entitled, "Unintended Consequences." In it, Sprott discusses how 2012 is shaping up to be the year of the Central Bank.

He writes,

"There is unfortunately no economic textbook to guide us through these strange times, but common sense suggests we should be extremely wary of the continued maneuvering by central banks. The more central banks print to save the system, the more the system will rely on their printing to stay solvent – and you cannot solve a debt problem with more debt, and you cannot print money without serious repercussions.

The central banks are fueling a growing distrust among the creditor nations that is forcing them to take pre-emptive actions with their currency reserves. Individual investors should take note and follow-suit, because it will be a lot easier to enjoy the “Year of the Central Bank” if you own things that can actually benefit from all their printing, as opposed to things that can only be destroyed by it."

One of the main 'things' he is referencing there is obviously gold. Sprott has long been an advocate of the precious metal and has called gold the ultimate Triple-A asset.

We've also highlighted how Sprott started a physical gold trust (ticker: PHYS) back in 2009 that competes with the popular exchange traded fund SPDR Gold Trust (GLD).

Embedded below is Sprott's February 2012 commentary, Unintended Consequences:

Sprott Launching Physical Gold Trust

It was only a matter of time. Sprott Asset Management has jumped in the recent gold fund pool by filing a preliminary prospectus in the US. While hedge fund Paulson & Co's new gold fund is aimed at betting on gold related investments, Sprott's offering is a little different. Eric Sprott's firm is aiming to launch a $575 million gold bullion fund that will store physical gold and offer investors easy exposure to the metal. This could easily serve as a competitor to the SPDR Gold Trust (GLD) that is currently a popular way for investors to get exposure to the precious metal. This really should come as no surprise given that Sprott had previously penned a piece entitled Gold: The Ultimate Triple-A Asset. Not to mention, their portfolio is littered with metals and mining plays.

If their new product is approved, it will be traded on the New York Stock Exchange (NYSE) under the ticker PHYS and on the Toronto Stock Exchange (TSX) under the ticker PHY. The initial public offering price is to be set at $10 per unit. Sprott's physical gold trust is expected to hold 97% of assets in physical gold bullion in London Good Delivery bar form and will not invest in certificates or other instruments. This fund's goal is to be a play purely on physical gold. Their gold will be stored at the Royal Canadian Mint and unitholders will be able to redeem their units for physical gold bullion on a monthly basis if they so desire. Additionally, as of right now they will not make regular cash distributions to the unitholders.

In summary, it looks like $4.4 billion Sprott Asset Management has entered into the gold fund game as a direct competitor to the SPDR Gold Trust (GLD). While Sprott is targeting a $575 million fund launch, they will have a long way to go to catch up to exchange traded fund GLD as it currently sports a market cap of $40.5 billion. We'll have to see if their offering takes off as Sprott is a relatively household name in the asset management business. For more thoughts from Sprott on the topic of gold, check out their special report on the precious metal.

Despite pulling back sharply over recent days, gold has seen an investment surge over the past year. Check out this video on gold to see logical pullback areas, price targets for gold's move, as well as where to place your stops. Do the launches of John Paulson's gold fund and now Sprott's Physical Gold Trust mark a top in the gold market? We'll have to wait and see.