Silver Remains in Backwardation

June 1, 2011 By 4 Comments

Its been a while since we examined futures contracts to get a feel on how tight the silver market is.
Silver market tightness seems to have eased slightly, as silver is now in contango from current month June 2011 through March of 2012.  From March 2012 on out however, silver remains in backwardation.  For readers new to the silver market, contango is a normal market condition, where a commodity’s contracts typically are more expensive further out into the future, as the holder of the asset must account for storage fees, insurance, etc.  When a market is in backwardation, this means that future contracts are selling at a discount to the current month, and indicates that there is either a distrust of the currency the commodity is priced in, (the US dollar in this case) or else there is a concern that the commodity will not be available when the contract comes due (exchange default concerns).
The Dec 2015 contract is now trading at a $1.05 discount to June 2011.

New York Mercantile Exchange (NYMEX) › Metals › SILVER (SI)
Market Contract Last Change Time
SI.M11 Jun 2011 38.303 +0.188 set 14:06
SI.N11 Jul 2011 38.305 +0.215 set 14:06
SI.Q11 Aug 2011 38.317 +0.122 set 14:06
SI.U11 Sep 2011 38.329 +0.239 set 14:06
SI.Z11 Dec 2011 38.351 +0.191 set 14:06
SI.F12 Jan 2012 38.340 +0.446 set 14:06
SI.H12 Mar 2012 38.315 +0.175 set 14:06
SI.K12 May 2012 38.281 +0.445 set 14:06
SI.N12 Jul 2012 38.256 +0.061 set 14:06
SI.U12 Sep 2012 38.237 +0.387 set 14:06
SI.Z12 Dec 2012 38.218 +0.208 set 14:06
SI.F13 Jan 2013 38.187 +0.450 set 14:06
SI.H13 Mar 2013 38.12 +0.45 set 14:06
SI.N13 Jul 2013 38.035 +0.447 set 14:06
SI.Z13 Dec 2013 37.913 +0.456 set 14:06
SI.N14 Jul 2014 37.720 +0.447 set 14:06
SI.Z14 Dec 2014 37.588 +0.456 set 14:06
SI.N15 Jul 2015 37.386 +0.451 set 14:06
SI.Z15 Dec 2015 37.251



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Comments

  1. Jay says:
    June 1, 2011 at 1:36 PM

    Great explanation.Even the fella with the baseball bat can understand.

  2. Anonymous says:
    June 1, 2011 at 6:06 PM

    I hope the Comex price plummets. It would be a great opportunity to buy. Americans are reaping what they sow. The destruction of America is immininent, for the Christian values are plummeting at an outrageous pace from idol worshipping college students to adults alike. Honest money will flourish, Silver and Gold!
    -Scott

  3. Big Machine says:
    June 2, 2011 at 1:20 AM

    front month contango is likely due to all the excess silver from the SLV liquidations like you're stating Doc!

  4. The Doc says:
    June 2, 2011 at 1:23 AM

    You're right Jay…that fella actually wrote this post! ;)

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