If you have ever been to Florida to witness our space shuttle lift off, you know what an amazing site that is.
It seems the launching pad for precious metals is being prepared at the moment, with gold and silver being the booster rockets.
The term backwardation has come up, and it is the current state of the silver market. Backwardation happens when future contracts on a commodity are priced lower than the current market cost. This has not happen with silver since 1997-98, when Warren Buffet bought a healthy chunk of the market. A cause for the backwardation that is being considered is the forward sales of metal used as a hedge by miners to continue operations. Others see it differently…
James Turk is calling for $50 silver in 2011 because of this. He also states that, if gold follows silver in this backwardation, it could be the beginning of hyperinflation.
Then there are those that remember the hunt brothers manipulation and will argue that backwardation only happens at the end of a rally, with a crash soon to follow.
Big difference between then and now!
This is real, not manipulation. JP Morgan has lost control of the silver market and physical demand is causing the backwardation this time around, not everyone selling anything they own that’s made of silver, causing a glut in physical that is not in acceptable form for the COMEX, which is exactly what happened in 1980.
Times are changing, luck favors the prepared mind.
It seems that the same thing is happening in silver that we noticed in gold. Investors are shedding their paper assets in exchange for physical bullion, as the silver ETF shed some weight as well recently.