Silver backwardation refuses to go away.
With open interest remaining near recent lows (112,137), backwardation continues to increase throughout back month contracts in silver.
Front month silver settled Thursday at $42.479, and silver still enters backwardation with the Dec 2012 contracts, which settled at $42.462. The July 2016 contract has widened to a discount of $1.471, a 3.5% discount to front months.
3.5% is an enormous discount for a back month contract, especially when 4 years of vault storage fees and insurance are added in.
(In contrast, back month gold contracts settled at $2,033 vs. $1854 for front months, a 9.7% premium to account for 4 years of fees and insurance).
This means that silver's back month contracts are in effect trading at a 13.2% discount compared to gold back months which remain in a strong contango, despite the recent massive rally to $1923.
This is perhaps the clearest evidence yet of the tightening physical supplies in the silver market, and general distrust among traders that ample silver will be available for delivery 4 years from now.
We couldn't agree more.