Silver Wheaton's Smallwood Remains Bullish on Silver Despite Volatility

On Thursday, Benzinga talked to Silver Wheaton's SLW CEO Randy Smallwood. Smallwood gave an overview of his outlook for silver in 2012, and addressed the economic conditions that have taken the price of the metal on a rollercoaster ride.

Spot silver is currently trading near $29 an ounce. Early in 2011, the metal went on record run, approaching $50 an ounce. It then experienced a sharp sell-off in May, before bouncing back late in the summer.

Since then, the metal has been in a steady, downward trajectory, with strong support near $25 an ounce.

Benzinga spoke to Smallwood in early August, when silver was trading near $40.

Smallwood believed that metal would touch its April highs before the end of the year. Although it did approach the mid $40 range, it never got back to that level.

Smallwood defended his position, stating that while the metal has seen some volatility, the larger trend remains bullish. On a multi-year timeline, silver has been one of the best performing commodities.

Smallwood characterized the fundamentals driving silver as a persistent "race to debase."

With the euro undergoing market pressure, the US dollar has strengthened significantly in recent months. Silver, priced in dollars, has therefore seen its spot price battered.

Smallwood was bearish on the euro in its current form, and doubted the ability of the currency union to survive fully intact.

Unlike Endeavour Silver's EXK Cooke, Smallwood did not believe that money printing could save the current Eurozone. Instead, he believes that the currency union is likely to be reborn as a smaller and more tightly integrated group at some time in the future.

According to Smallwood, when that happens, the euro could actually strengthen—sapping strength from the US dollar and benefitting the price of silver.

During the bull run in precious metals in the 1970s and early 1980s, mining companies experienced sharp rallies as investors looking to play the underlying bullion may have taken stakes in the miners.

Notably, that has not happened as much in this recent run. This may be due to the rise of ETFs such as the SPDR Gold Trust GLD and iShares Silver Trust SLV.

Yet, Smallwood argued that his company's stock was a direct play on the metal. Silver Wheaton is aggressive and open with its policy of hedging—that is to say, they do not hedge and have no plans to ever introduce hedging into their business model.

Silver Wheaton opened on Friday at $30.79 a share. Spot silver traded down slightly during early trading on Friday, hovering at just above $28.80 an ounce.

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