Market Curiosity: Exploring Markets And Systems

February 28, 2011

Silver backwardation update on Feb 28th: LBMA 12 days, COMEX (partial) 18 days, both about the same

Filed under: Just Watching — Tags: , , , , , , — Jeff Fitzmyers @ 12:08 pm

Ben Davies on King World News:Positive silver lease rates at this point are more a function of credit risks, i.e. counter-party concerns, than they are about egregious metals shortages although metals shortages clearly exist… Right now it would appear that as the March/May spread is not moving wider, it is unlikely that we will experience commercial signal failure. Certainly open interest on the March contract is reduced to 4,000 contracts. Having said that, it only takes a few short contract holders failing to deliver to set off a short squeeze in the market.

4,000 contracts, as of Friday, is still 20 million ounces — half of what is available. Open interest will likely drop today too.

UPDATE March 3: I have some mistakes on the chart. This one is correct. The following 1 is not correct. A similar price rise for 2011 targets 38 $/oz.

The 2011 12 month SIFO is 3 times deeper than 2008. Will that translate to 3 times greater price rise, or length of time prices rises in 2011? Maybe both?? If we incorporate Mr Davies info, that might suggest the 2011 12 backwardation could be prolonged — but I wold not expect that all the way out to 12 months. And it does seem to impact the original low of -0 .06000.

Preliminary data shows 1.14 difference between March 2011 and December 2015.

References
+ Silver, backwardation update for Feb 26th

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