Something’s brewing behind the scenes inside banks.

says Eric Sprott.

One of the things working in favor of the precious metals sector is a looming shortage of silver.

“There is going to be a shortage of silver. We get information from dealers looking for supply and paying premiums, which is almost unheard of. And when I look at the amount silver going into ETFs and going into India, there is no way that there is not going to be a shortage,” Sprott highlighted.

On top of that, there is “a huge problem” happening under the surface — the ongoing bank liquidity crisis and how the Federal Reserve is responding to it.

“There’s something happening underneath the surface where bank illiquidity is encountering a huge problem, and we are not being told. Who knows what’s going on behind the scenes? The most likely thing is somebody has blown up their derivatives book, and all the banks are calling in loans to other banks for fear … of the domino effect. The repo market has come under tremendous stress,” Sprott said.

The problem became visible to investors in mid-September when the repo rates surged close to 10%, he added.

“The fact that they let it happen. The fact that they weren’t aware that it was happening. So there’s this huge illiquidity situation in the banking business which they thought they solved,” Sprott said.

Be ready to be surprised when it comes to the precious metals market, said Eric Sprott, billionaire precious metals investor and founder of Sprott Inc.

The world is getting used to gold and silver at their new price levels after a summer rally and more surprise could soon be in store for the precious metals sector, said the legendary investor during Sprott Money’s Weekly Wrap-Up on Friday.