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The renowned Canadian fund manager Eric Sprott told The Gold Report that he thinks the silver price is ready for a dramatic rally higher, and reiterated his prediction that silver will be the “investment of the decade”.

He thinks that the silver price has the potential to climb up to a level that would correspond with a gold/silver ratio of 16:1 – the historic average. According to Sprott, this will happen in the next five years; if the gold price rises to $2,500 per ounce in the wake of an escalating global debt crisis, he thinks a silver price of nearly $160 per ounce could be derived from it. This simple calculation alone shows silver’s enormous potential compared with the gold, despite the already big gains in the silver price over the last seven years.

In the course of an extraordinary rally from September last year until the end of April, the silver price came within cents of reaching its all-time nominal high of $50 per ounce – reached back in 1980. Afterwards the CME Group, operators of New York’s Comex metal futures exchange – a subdivision of the New York Mercantile Exchange – announced a series of margin rises on silver futures and options. As a result the silver price nosedived, falling nearly 40% from its peak at nearly $50 to $32. Since this sharp correction in early May, silver has traded in a narrow trading range between $34 and $38 per ounce, but over the last two trading days the metal appears to have again broken out to the upside.

The recent price correction has been a good thing in the view some. Renowned investor Jim Rogers warned that he would have been forced to sell his silver if the price had continued barreling higher in April, as it would have been a clear sign of a silver price bubble. Rogers thinks that the correction has offered people a good opportunity to buy more of the metal. Eric Sprott expects silver to rise above $50 per ounce by the end of the year.

Many people have been put off from buying silver by the volatility that has been exhibited in this market over the last few months, though interest has picked up in the metal again over the last week. Sprott expects silver sales to likely exceed gold sales in US dollar terms in a 5:1 ratio. More and more people will start to lose confidence in fiat currencies around the world, which will spur them to buy “the poor man’s gold”. Sprott expects the US Federal Reserve to start printing more money – “QE3” – by the end of this year.

Sprott also adds that demand from industry will also bolster silver prices. Combined with the buying pressure from people fleeing from weakening currencies, and in Sprott’s mind, we have the perfect storm to send the silver price through the roof. Click Here!