By Dr. Jeffrey Lewis
The price of silver futures contracts have been regularly flirting
with a state of backwardation ever since the 2008 financial crisis,
which is a sign of a growing physical silver shortage. A state of
backwardation occurs when the front month silver futures contract
commands a price premium to the subsequent months’ contracts.
On one hand, this situation could actually provide larger traders who
own the physical silver with an opportunity to simultaneously sell it
and purchase futures contracts to recover their metal holdings for a net
profit.
Paper and Physical Silver Price Backwardation
A backwardation also tends to indicate that industrial and personal silver consumers need the metal more now, rather than later.
When a backwardation in the silver market is driven by perception on
The Street, this phenomenon would actually reveal the true fate of
larger traders with insufficient physical silver supplies available to
profit from this apparently easy money.
Nevertheless, the silver futures market ceased being a physical
market years ago when the overall short position became dominated by
just a few bullion banks. Whether these players control 25% or 50% of
the net shorts, this concentration influences the paper price.
People Will Pay Whatever it Takes for Silver
The price of silver will ultimately be driven by premiums, which are
ultimately determined by demand at the retail level. As confidence is
lost in the futures market and shortages develop at physical metal
dealers and scrap flows drop because they have already been panned out,
an industrial panic will compete for the large (1,000 ounce) silver bar
supply.
Following the notable silver rally in 1980, the market saw a
divergence in demand flow. One consisted of a reduction in demand for
increasingly expensive silverware and silver jewelry, which fell out of
favor as wealth declined and cultural preferences shifted.
In contrast, silver production and demand for use in electronics and
other industry took off, although governments sold their stockpiles of
silver cheap, indirectly debasing their paper currencies along the way.
read more at http://www.resourceinvestor.com/2013/02/28/silver-price-backwardation-corrections-and-percept?ref=hp
MAKE SURE YOU GET PHYSICAL SILVER IN YOUR OWN POSSESSION. Don't Buy SLV, or Futures or Pooled Accounts or any other BS paper silver product .Remember anything on paper is worth the paper it is written on. Go Long Stay long the bull market have even started yet
Demand for Silver products is soaring, but prices are dropping, some buyers say they're having a tough time buying silver coins and bullion of late - as if there's a real shortage unfolding. This has ignited all sorts of conspiracy theories, and a lot of worry, too. For several weeks now, it has been difficult to purchase physical silver at any of the nation's coin shows, and most dealers have a very small supply - if they have any inventory at all. What little silver they can purchase, they tell me, goes out the door quickly as buyers snap it up. Yet the market price of silver remains below $29 to $30 an ounce.
Recent reports note that Russia has made a hefty purchase in excess of 25 tons of silver.
