Silver Bullion Backwardation Suggests Supply Stress

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Fri, 02/11/2011 - 11:44 | 952727 TraderMark
TraderMark's picture

Two of the Western world's last remaining hawks kicked to the curb this week.  In Europe, Axel Weber was thought to be shoo in to be next ECB chief.  Suddenly he is resigning.  So he is Kevin Warsh of the US.  Hmmm....

Fri, 02/11/2011 - 12:49 | 953046 jus_lite_reading
jus_lite_reading's picture

The politico shuffling is occuring for a reason, and right before the SHTF...

Fri, 02/11/2011 - 11:47 | 952738 CD
CD's picture

Backwardation is when the market quotes a lower price for spot delivery or a more nearby delivery date, and a higher price for a distant delivery date in the futures market. It indicates that buyers are concerned about securing supply in the future and are willing to pay a premium for spot delivery.

Doesn't the first sentence contradict the second? Should be "higher price for spot", no?

Fri, 02/11/2011 - 11:52 | 952755 MarkTwainsMustache
MarkTwainsMustache's picture

Correct spot>future price = backwardation, spot<future price = contango

Fri, 02/11/2011 - 11:53 | 952760 terryg999
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That's what I was thinking. 

Fri, 02/11/2011 - 12:06 | 952805 AugmentedFourth
AugmentedFourth's picture

Ha ha ha, I see what happened here!

Funny, this quote is actually lifted straight from the very first sentance of the very first result Google returns when you search for "backwardation"; A Wikipedia entry on normal backwardation which is not the same as backwardation in the precious metals context.

That's what you get for lifting things straight from Wikipedia without even reading them. Lazy...

Fri, 02/11/2011 - 12:17 | 952873 kentfinance
kentfinance's picture

yes. correct. worrying error on their part

Fri, 02/11/2011 - 12:21 | 952902 Hephasteus
Hephasteus's picture

Backwardation = Pay a premium to get it right now with some hope in the seller of replacing it at lower price.

Contango = Price in future is much much lower indicating that there's no faith in getting it in the future. Right now price is all that matters. Implies that something has to crash in value to make the market balance it books.

Fri, 02/11/2011 - 12:26 | 952931 nontaxpayer
nontaxpayer's picture

sure, this is what happens when you've actually never worked in the markets, but just blog about it lol...;-)

Fri, 02/11/2011 - 15:01 | 953079 Hephasteus
Hephasteus's picture

What experience can you gain from the market?

Gold is not a consumable commoditity. It's status and behavior as a backwardation or contango participant shouldn't happen.

Silver is a consumable commodity and it will rip the market to shreds.

Fri, 02/11/2011 - 15:40 | 953777 ColonelCooper
ColonelCooper's picture

So rather than assume the writer was trying to get a quick textbook definition pasted in and was in too big a rush to read it, you assume the author doesn't know what they're talking about.  The difference between you and them is that the T.D.s are scrambling to bring you a constant flow of real time shit, while all you have to do is make a smart ass comment here and there.

Fri, 02/11/2011 - 23:46 | 955096 Trifecta Man
Trifecta Man's picture

Seems to me that you can not trust this Goldcore as a source for anything, which such a blunder like this.

Fri, 02/11/2011 - 11:48 | 952740 Quinvarius
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JPM loves jumping in front of that bus.  LOL.  Worst commodity traders ever.

Fri, 02/11/2011 - 14:18 | 953473 tmosley
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They aren't traders, they are suppliers.  They just have REALLY bad QA/QC.  When they ship a commodity, all that is in the crate when it gets there is a piece of paper that says "silver" on it (ro "cotton", or "rice", or "copper"--whatever the case may be).

Fri, 02/11/2011 - 15:38 | 953768 Bigger Dickus
Bigger Dickus's picture

If you really beieve that,.... (you know the rest, buddy)

Fri, 02/11/2011 - 11:50 | 952747 bankrupt JPM bu...
bankrupt JPM buy silver's picture

Part 4 out today touches on this....on a greater note, you can buy Blythe dolls on my blog, comes with kitchen sink accessory kits.  Enjoy.

Fri, 02/11/2011 - 12:18 | 952876 Eternal Student
Eternal Student's picture

+1. I'm delighted that the new video will be out today. I enjoy these, and have been looking forward to this next one.

Regarding the Blythe doll, that's cute. Might I suggest an optional Dominatrix outfix with whips and chains? Along with a set of voodoo pins? For those who want to stick it to Blythe. :)

Fri, 02/11/2011 - 11:52 | 952754 Ancona
Ancona's picture

When all of the paper holders try to get their hands on physical......get ready for fireworks.

The only reason for SLV anbd GLD to exist is to bleed off demand for the real stuff. If they can book profits without having to worry about those pesky little bars of gold, so much the better. But when they realize they really don't have any gold to deliver......there will be blood.

Fri, 02/11/2011 - 11:54 | 952763 Kaiser Sousa
Kaiser Sousa's picture

until Silver is trading n $50-$100 range on the phony paper exchanges the fake ass spot price is irrelevant...just keep buying with every available debt coupon dollar u possess...

fuck all bankers....








........('(...´...´.... ¯~/'...')


...........\.............. _.·´







Fri, 02/11/2011 - 13:23 | 953215 Hugh G Rection
Hugh G Rection's picture


Indeed. Fuck ALL the banksters! Especially the Jekyl Island demonspawn cabal of pontificating swine.  If we stand up together we can assure the FED doesn't celebrate a 100years of oppression. 

Fri, 02/11/2011 - 14:41 | 953572 Don Smith
Don Smith's picture


Fri, 02/11/2011 - 11:54 | 952765 umop episdn
umop episdn's picture

In an age where central banks openly print money and bankster fraud goes unpunished, the smart thing to do is to dump all the bankster paper and hold something useful and recognised as a store of value for thousands of years. Silver has additional advantages as the banksters do not now have very much of it so manipulating the price is harder for them to do, plus it is an incredibly useful metal. Argentum, FTW!

Fri, 02/11/2011 - 11:58 | 952771 confimationbias
confimationbias's picture

Max Keiser and King World News links that seem to be new:


Please comment, as I am not knowledgeable enough....

Fri, 02/11/2011 - 12:16 | 952867 Snidley Whipsnae
Snidley Whipsnae's picture

Your first link in new info I believe.

Your second link is from last March.

To see more about Magure testimony go here...

...and here...

Fri, 02/11/2011 - 13:55 | 953360 tellsometruth
tellsometruth's picture

only new news from google i could find... obviously not him but ominous

Fri, 02/11/2011 - 16:58 | 954058 Hephasteus
Hephasteus's picture

Termintor has a phone book page.

Fri, 02/11/2011 - 11:59 | 952773 Snidley Whipsnae
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"But Faber said that precious metals, especially gold and silver could fall in the short term with the general market."

Sounds like talking one's book or jawboning for the purpose to adding to a position.

Asian and Mid East buying of gold/silver/commodities are soaring and Fabar sees a correction? Does Fabar see a Fed rate hike coming? If not, he should stfu.

Fri, 02/11/2011 - 12:53 | 952841 Bay of Pigs
Bay of Pigs's picture

That's what I thought. All commodities are soaring? Not quite Mr Faber. The charts show a correction and are now just turning positive again. Lots of room to run to the upside before we get "overbought".

I think $1500 gold and another 5-6 bucks for silver are very realistic short to mid term.


Fri, 02/11/2011 - 13:17 | 953194 pacu44
pacu44's picture

That's what I thought. All commodities are soaring?


I agree, and in all this soaring, the USD is in the lead while the rest of commodities soar... As long as the USD goes to the moon, I expect at least the metals to follow... Am I wrong?

Throw in the real money aspect and the industrial use of silver... I am scared to think that it is a sure thing... BUT there is nothing holding this rocket to the moon to earth...

Fri, 02/11/2011 - 12:24 | 952919 dryam
dryam's picture

I like Faber a lot, but he makes so many predictions on where the markets are going.  The one thing he's consistent on is his overall bearish attitude, but his short term calls aren't worth much.

Fri, 02/11/2011 - 12:35 | 952983 Snidley Whipsnae
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"but his [Faber's] short term calls aren't worth much"

His short term calls could be worth a great Faber. We might find out which way Faber bet in hindsight...but probably not.

Fri, 02/11/2011 - 12:01 | 952783 Blindweb
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Is there anything else backwardation can mean?  I like to cover all the angles

Fri, 02/11/2011 - 12:08 | 952824 topcallingtroll
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Yes someone please tell us.

Fri, 02/11/2011 - 12:02 | 952787 nevadan
nevadan's picture

"The demand is also very strong on the industrial side where the increasing range of industrial applications is leading to very significant demand that the silver market does not appear to be able to accommodate at these prices."

Anecdotal evidence of this.  Tulving is advertising for deliverable bars.  Just send in your dusty old 1000 oz bars and a check for $750 and they will gladly send you 10 brand new 100 oz bars.  What a deal!  Think I'll keep mine instead.

Fri, 02/11/2011 - 12:06 | 952789 topcallingtroll
topcallingtroll's picture

Damn you silver! Ok the troll capitulates. I just bought a box of eagles from this is a sure sign the top is in, but at least i will have some shiny shit to look at. My kids always liked to play with them. Love of silver must be innate. When i offer my kids the dollar equivalent for their silver they refuse. They will spend green stuff but not their silver and they dont even know gresham's law.

Fri, 02/11/2011 - 16:48 | 954016 DoChenRollingBearing
DoChenRollingBearing's picture

Good for you buying silver!  Your kids are showing you as well that you made a great decision.

+ $30

Fri, 02/11/2011 - 12:05 | 952794 Pure Evil
Pure Evil's picture

Ok, Yahoo Finance finally confirms it, Hosni has left the building. (snark)

Fri, 02/11/2011 - 12:07 | 952818 Kaiser Sousa
Kaiser Sousa's picture

so Mubarack steps down and somehow all the worlds debt problems r solved and Gold & Silver r "sold off" cause  - "who needs real money anymore?????"....

what a fucking joke....

fuck bankers.........

Fri, 02/11/2011 - 12:14 | 952851 topcallingtroll
topcallingtroll's picture

Remember that silver is really the optimists metal and gold is for the pessimists.

Fri, 02/11/2011 - 12:43 | 953001 GoinFawr
GoinFawr's picture

No, because I am optimistic that my pessimism concerning fiat bitz and bytes of paper is justified.

Fri, 02/11/2011 - 15:01 | 953620 Hephasteus
Hephasteus's picture

The question isn't if being pessimistic is the right thing to do. The question is if we are being pessimistic ENOUGH.

Fri, 02/11/2011 - 18:22 | 954353 Lord Koos
Lord Koos's picture

Hope for the best, prepare for the worst.

Fri, 02/11/2011 - 16:55 | 954048 DoChenRollingBearing
DoChenRollingBearing's picture

@ top,

Mr Lennon Hendrix suggested recently that platinum is really the PM for optimists (increased car sales, etc.).

Fri, 02/11/2011 - 12:14 | 952855 Bigger Dickus
Bigger Dickus's picture

To all bullion permabulls:

The interim top in gold is in. Stick a fork in it.

Silver is screwed.

Fri, 02/11/2011 - 12:17 | 952872 oddjob
oddjob's picture

$CAD says you are wrong again.

Fri, 02/11/2011 - 12:43 | 953020 yabyum
yabyum's picture

On that news, Iam going to add some more!

Fri, 02/11/2011 - 13:20 | 953206 gwar5
gwar5's picture

To all Fiat Perma-Printers: stop banging your spoons on your high chairs. Get real.

Fri, 02/11/2011 - 18:23 | 954355 Lord Koos
Lord Koos's picture

Go contrary to the big dick and you'll be fine.

Fri, 02/11/2011 - 12:17 | 952870 Bigger Dickus
Bigger Dickus's picture

Tyler, stop yping silver or there'll be lots of sobbing lemmings on ZH in a few months.

Fri, 02/11/2011 - 12:23 | 952911 Kaiser Sousa
Kaiser Sousa's picture

yeah, ive been sobbing every since i started accumulating @ $10 per oz....

another genuis roaming the Hedge i suppose.......

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