Sprott bearish on base metals, positive on gold, oil

Thu Jan 19, 2012 9:19am EST
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By Frank Tang

NEW YORK (Reuters) - Prominent Canadian fund manager Eric Sprott said on Wednesday he was bearish on cyclical commodities such as industrial metals because of the economic slowdown, though he remained positive on gold and crude oil.

Sprott, a long-time gold bull who last week filed to launch a platinum and palladium product allowing investors to redeem the physical metals, said he expects that business to grow in the wake of MF Global's collapse.

"I am not bullish on cyclical commodities such as iron ore, coal, steel, lead and zinc because I am worried about this economic contraction that everybody is talking about," Sprott told Reuters in a phone interview from his Toronto office.

He expects gold to hit a record above $2,000 an ounce this year, with silver also rallying to an all-time high at more than $50 an ounce. On Wednesday, gold traded at $1,660 an ounce and silver at $30.50.

Sprott, whose parent company Sprott Inc (SII.TO: Quote) manages around C$9 billion in assets, has been bearish on cyclical commodities since the 2008 global economic crisis, and has maintained the gold and silver forecasts throughout last year.

"I think there is more upside to the gold-mining stocks. Last year, the stocks were absolutely crushed when the price of gold went down. But when gold goes back up, the stocks will provide a better return."

Bullion lost 10 percent in December and briefly entered a bear market, as it struggled to regain its safe-haven appeal even though investors questioned the viability of the euro.

Year to date, spot gold was up 6 percent, largely tracking equity markets' gains. It posted a 10 percent gain in 2011 that sealed its 11th consecutive year of gains.   Continued...

<p>Sprott Inc. Chief Executive Officer Eric Sprott speaks during the annual general meeting of shareholders in Toronto May 12, 2010. REUTERS/ Mike Cassese</p>