Are Central Banks Fighting to Reduce the Price of Precious Metals?

Only the central banks can answer that one. But if Eric Sprott's assumption is correct, they might have more to do with the price than meets the eye.

"One of my ongoing assumptions when I first got involved in precious metals in 2000 is that certainly central banks want to keep the price of metals down,” Sprott told Benzinga during a recent interview. “And it's just an inbred thing that they do because they don't want there to appear to be either a financial crisis or inflation – or anything like that – and any time that those situations seem apparent, there's even more pressure brought on precious metals. I think this is exactly one of those."

Sprott, who is the CEO of Sprott Asset Management, is a long-time proponent of owning both gold and silver.

"I think there were a number of shorts with very, very large positions that were finding the increase in the price of silver unbelievable, and obviously incredibly punishing,” he said. “It makes you wonder whether this was a bit of a set-up to cool the interest in silver."

Further, Sprott spoke about the relationship between central banks and the precious metals markets.

"The need to make it look like there is no inflation is a huge thing,” Sprott said. “When they [at the Fed] sit down at the end of each day, probably the first thing they're asking is, 'What's the price of oil? What's the price of gold? What's the price of silver? What's the price of food products?' Because if it gets out of hand, the word is out to everyone that we have an inflation problem, which works very much against central bank policy.”

To hear more from Sprott Asset's chief executive – including his views on inflation and the structure of the silver market – don't miss Benzinga's full interview with Eric Sprott.