Market Curiosity: Exploring Markets And Systems

February 11, 2011

COMEX backwadation to day 6, LBMA to day 7; Scotia Mocatta still out of 1,5 and 100 oz bars

Filed under: Just Watching — Tags: , , , , , — Jeff Fitzmyers @ 6:24 am

James Turk: There is a huge story that is brewing. Silver is in backwardation to 2015, which is 13-cents cheaper than spot. This is unbelievable. Money does not go into backwardation except ‘in extremis’!… If this situation continues, and there is no reason to suspect that it is about to end quietly because the demand for physical silver is not abating, there are only two alternatives:

One, as we discussed on Friday, the silver price has to rise in order to dislodge physical metal from the strong hands that now own it. But why would anyone accept some national currency in exchange for physical silver unless the price is much, much higher?

Two, the shorts declare force majeure and use government force to let them escape from their untenable position. The fall-out from this outcome is very complex because there are so many factors to consider. But I would expect that any default would only strengthen the resolve of the strong hands now owning physical metal. Meaning that the market for physical silver would become even more tight than it is now, even if the price shoots higher as I expect.

References
+ COMEX backwadation to day 5, LBMA to day 6 and now Perth Mint out of 100 oz silver
+ COMEX silver settlement prices
+ Scotia Mocatta still out of 1,5 and 100 oz bars
+ LBMA current stats
+ COMEX settlements

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