Market Curiosity: Exploring Markets And Systems

February 5, 2011

Silver shortages and backwardation update

Filed under: Just Watching — Tags: , , , , — Jeff Fitzmyers @ 2:23 pm

Silver Shortages Continue According to Pan American CEO …anecdotally … I have heard that the end users on the commodity side are having trouble locating silver… The end users are being forced to come back into the market and that could be the torque to move the price of silver higher.

PAAS is “one of the largest silver producers in the world” and yet is forecast to produce about 24 million ounces this year. The US Mint recently sold a record of over 6 million ounces in January. At half that rate, they would use all of PAAS’s supply in 9 months.

James Turk: …backwardation is an indication of how tight silver is…Silver is starting to lead and this is the kind of thing you want to see when the precious metals are ready to start another leg up… When asked about sentiment being so bearish on gold Turk commented, “It throws me, but it’s just so unbelievably bullish. I mean we’ve had a huge contraction in Comex open interest as an example, particularly over the last couple of weeks. And here we are just a heartbeat away from new record highs in gold, and silver threatening to go to a multi-decade high…

James Turk mp3: China is number 1 silver producer. Was an exporter of silver, now an importer.

Gene Arensberg’s perspective: We cannot overemphasize how unusual and rare it is to have zero contango in the silver futures strip… The closing price for the December 2015 futures contract was … 5-cents less, repeat less, than today’s spot price – for delivery four years hence.

Feb 6: Adrian Douglas: Since September 2010 silver has not been trading in lock step with gold.

References:
+ COMEX joins LBMA in backwardation
+ Why I prefer SLW to CDE, HL, PAAS, SSRI and silver
+ Silver tasting LBMA backwardation, Scotia Mocatta out of silver bars, etc.

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