Canadian investor and billionaire Eric Sprott has a particularly good reputation in the mining sector, as the funds he manages buy physical commodities and also invest in high-risk explorers and mine developers. Within the commodities sector, Eric Sprott has a well-known weakness: He is extremely bullish on silver and expects a strong price increase for the white metal very soon.

Recently, Eric Sprott was quoted as saying: “Silver will shoot up. Be positioned before the crowd notices.” Currently, depending on the daily rate, an ounce of silver is trading at prices around 34 US dollars. Although silver is thus trading at a relatively high level compared to long-term averages, Eric Sprott considers the current prices to be a “historical mispricing”.

In the short term, it may seem that investors like Eric Sprott are dreamers, because since US President Donald Trump assured this week that silver, like the other precious metals gold, platinum, and palladium, will not be affected by his tariffs, prices for gold and silver are trending significantly southward. The motive to buy silver now and have it physically delivered because one was afraid that it could soon be subject to high tariffs has become obsolete. It is no longer a short-term price driver.

Tariffs or no tariffs? That is not the decisive question. Only the long-term prospects should determine whether an investment is made or not

But this does not mean the general rally in the most popular precious metals, gold and silver, is over by any means. For long-term gold and silver bulls like Eric Sprott, however, this is not a major setback. They all know that even the longest upswing is never a one-way street. Strong increases are inevitably followed by phases in which prices move sideways for months or sometimes undergo sharp corrections, which in turn form the basis for the next upward impulse.

The sharp drop in the silver price from 34 to 30 US dollars per ounce that we experienced this week will certainly irritate and perhaps frighten some investors. However, it does not change the good fundamental outlook, especially for silver. These remain unchanged regardless of what Donald Trump does or decides.

Moreover, it is precisely these long-term factors that motivate investors like Eric Sprott to engage in this extremely attractive market. Even sharp, short-term price declines will not change much about this. We should therefore assume that many investors who think and act in this way will primarily understand the recent price slump as an invitation to buy decisively right now, where one can get more gold and more silver for their euros or US dollars.

From an ecological perspective, the price of silver is still far too low

While gold has been storming from one all-time high to the next in recent months, silver has also risen but has not been able to keep up with the rapid rise of its big brother. This lagging behind has led Eric Sprott to view silver as the most undervalued asset worldwide. In his opinion, price discovery completely ignores the excellent fundamentals of silver.

Investors buy gold to hoard it as a store of value. It has no real industrial function. This is quite different with silver, as more than half of global production goes to industry. Here, silver is consumed, and in many places, this happens so thoroughly that even later recycling is not possible. For example, an American Tomahawk cruise missile contains 500 ounces or 15.55 kilograms of silver. This silver is literally scattered to the winds when it hits its target and is therefore no longer available for later recycling.

The defense industry is by no means the only sector currently handling the world’s limited silver reserves rather carelessly. A lot of silver is used in solar panels. Here, the latest generation of modules has nearly doubled the silver consumption compared to previous models. The silver built into the modules is not only tied up there for about 20 years and therefore not available to the market in the short term. As with military applications, the recycling problem has not been nearly solved here either.

Those who recycle solar panels do not receive a credit for the recovered metals, but instead must pay money to even start the recycling process. This is also due to the low price of silver. If it were higher, recycling solar panels would be profitable again. As long as this is not the case, the recovery of silver is abandoned for purely economic reasons. It is carelessly discarded as waste rather than being industrially reused. From an ecological point of view, this is a highly unsatisfactory situation.

How high must silver rise to be appropriately valued?

This observation inevitably leads to the question of how high the silver price would need to be to adequately reflect the true value of the precious metal. The geological ratio and historical gold and silver prices provide an initial indication. They are very well expressed by the gold-silver ratio.

In the upper layers of the Earth, silver is found 17 times more frequently than gold. If both precious metals were valued roughly equally by humans, the gold price should thus be about 17 times higher than the silver price. Or in other words: To buy one ounce of gold, 17 ounces of silver would need to be put on the table. However, since not every silver deposit can be profitably developed at today’s prices, the mining ratio is currently 8:1. For every ounce of gold mined, eight ounces of silver are simultaneously extracted from the processed ores.

Until modern times, the gold-silver ratio largely followed the geological ratio – albeit with sometimes strong fluctuations. In ancient Rome, the price of gold was eight times higher than the price of silver. Around 1450, the silver price in Europe reached its peak. Afterwards, silver imports from the Spanish colonies caused the silver price to drop significantly again compared to gold. When the US Coinage Act was passed in 1792, the young American state therefore set a ratio of 1:15.

Silver prices of over $200 per troy ounce?

Today, however, 90 ounces of silver must be spent to buy one ounce of gold. At its peak a few years ago, the gold-silver ratio had even briefly risen to over 120. For Eric Sprott, this imbalance is unsustainable. He calculates that either the gold price would have to come down very sharply or the silver price would have to rise to $200 per troy ounce if we want to return to a ratio of 1:15 with a given gold price of $3,000 per troy ounce.

During the last silver bull market, the white precious metal briefly rose to $49.51 per troy ounce. Gold cost $1,900 at the time, resulting in a brief gold-silver ratio of 1:38. To reach that ratio again, silver would need to rise to $78 per troy ounce. Is that possible? Eric Sprott is one of the investors who believe such an adjustment is possible, as the silver market will show a deficit for the fifth consecutive year in 2025.

More silver is being consumed in industry than is simultaneously mined. So far, this missing silver has been covered by existing above-ground stocks. But these stocks are finite and can therefore never feed a permanent deficit. How long the stored silver will suffice to close the gap is disputed in the professional world.

How much silver is still stored in various vaults or cellars?

Since much silver is stored in private households in the form of jewelry, cutlery, but also bars and coins, no one can determine the exact amount of this silver. The professional world is thus forced to operate with estimates and assumptions that may or may not be correct. But even if the gap and the privately stored silver can be correctly stated, it still does not mean that this silver will come to market at today’s prices.

Every small private investor who has some silver but feels no need to part with it at current prices exacerbates the crisis in the market. Until now, the silver price has been relatively unimportant to most people. However, should this attitude change in the coming years and silver be seen again as something valuable that one would like to own, the basis for a perfect storm is laid.

Eric Sprott believes in this storm. He has been physically taking silver off the market for years, and it’s unlikely that he will give it up easily just because the silver price has risen by five or six US dollars. Even if the silver price were to rise to 78 US dollars in the short term, thus reaching the gold-silver ratio from 2011 again, it’s by no means certain that investors like Eric Sprott will suddenly be on the selling side. They know all too well that even much higher prices are possible when the hunt for the last available silver suddenly begins.