Hi Pic!
Why is silver so weak relative to gold? Well gold is getting a boost lately because some high profile hedge funds have gone long the metal, and some high profile producers have decided to close out hedges. Collectively that represents many millions of ounces of buying in the open market. The hedge funds were playing the gold ETFs which does not translate into real bullion demand, IMO. But since a few funds have announced dumping ETF holdings and buying real bullion, I think that trend is now demonstrating a gradual shift into real bullion demand, and there is your bump higher to record gold prices.
Silver tends to follow gold higher but we do not have the same rotation into physcial bullion (yet). The shorts have continued to pile on silver as proven by the COT report, with tens of thousands of new contracts laid on from the short side. Since silver is a long way from its highs for this bull market, there are many shorts that are still in the money, while gold has been breaking out and every short is losing money. Silver is thus an easier target, for now.
I do not buy into the concept that silver must confirm an uptrend with gold. Why not say the same for copper, or oil? They are all related in terms of inflationary triggers and demand inputs. For me silver is still the go-to metal and the opportunity to build lifetime wealth. I do not think there is any force on earth that can reverse the bull market for gold, silver will follow gold higher as an alternate precious metal. Since we know there is less silver in bullion form above ground than gold in the world, eventually this shortage will result in a mark up for silver that is many times the current price. That is how I see it, and in time we will have hedge funds locking up physical silver just like they are doing with gold. Then its game over for the COMEX shorts.
As for ECU, its a play on patience right now. I do not post often anymore because there is nothing left to say. If ECU can earn enough operating cash flow to fund all its financial commitments and have a few million left over to drill the deep targets, then ECU should be able to get more speculative attention in the market. Otherwise its a holding company for higher silver, since the large silver mineral inventory will eventually command a premium as silver prices escalate. I do not think ECU is attractive as a producer now, there are much more exciting companies out there to play for that leverage. ECU is an exploration story when they get the drills turning again, and a resource story when silver breaks out again. Right now its a hold, IMO.
Please do not confuse my opinion as bearish. I get emails whenever I post anything that is less than rah-rah bullish. I am a long term bull, but I just do not see a catalsyt for ECU to go bananas right now. I am content to wait, and expect that catalsyt is part of the story down the line.
ECU is a paid advertiser on my website.
cheers!
mike
