More on silver and backwardation.

This is something I just read and would like to share it with anyone who wants to learn more about silver and how it is going higher in 2011:

 

While I’m on the subject of silver, I want to briefly discuss the silver backwardation issue…where the front month [March] is selling at a premium to the May contract…and beyond.  When I was looking at the silver futures trading on Friday, I didn’t see any premium at all between March and May.  As a matter of fact, the May contract was selling for about 2.5 cents more than the March contract, which is not backwardation at all.

To find silver selling at a discount to the March silver contract, I think I had to go out to the September 2012 contract to find any sign of backwardation…and even then it was only a penny cheaper than the March contract.

To give you an idea how tight and how close we are to real backwardation.  March silver is quoted at $29.995 the ounce.  If you go out to December 2015…silver is quoted at $29.875 the ounce.  That is true backwardation…but who would want to sell silver in March hoping to get it back in December 2015 and save themselves 12 cents the ounce?  Nobody, that’s who.

Every time I purchase physical silver, I always wonder if that is the last time that I’ll be able to buy it on the cheap.  I don’t know when all this is going to end, but when it does, I don’t want to look back with regret that I didn’t buy every ounce that I could right up until the bitter end.  So, I’m going to stay ‘all in’ until the silver market hatches into something….and it just might do that…and soon.

Silver is now retesting its high of US$30.70 an ounce.

It is, therefore, likely that market participants who were waiting for a stronger correction in the price of silver to the 200dMA level would become more aggressive buyers of silver at every pull back from now on, remembering that while they waited, silver went powering back up.

What would I do? The next time silver pulls back to US$27.40 to US$28.00 an ounce, I could increase my exposure to the metal. I still do not like to chase and would not buy at current levels but would wait at a higher level to collect instead of US$24 an ounce I was waiting at before.

Higher price of silver and a stronger US$ is reflected in the selling price of silver at UOB today: S$39.20 an ounce.

Source: Gold and Silver Daily, 15 February 2011.