Silver Contract

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Golden Minerals is a junior silver producer with a strong growth profile, listed on both the NYSE Amex and TSX.

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vhf

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Silver Contract

posted on Feb 05, 2011 10:39PM

Nice plunge...

Regards - VHF

Chart Shows Dramatic Plunge of Silver Contango

Gene Arensberg

February 5, 2011

HOUSTON -- Following up on this morning’s Got Gold Report offering which noted the absence of contango in the COMEX silver futures market, please see the graph just below which reflects the dramatic plunge in contango in the COMEX silver futures “strip.”

(Silver contango plunges to backwardation in February, 2011. Please see the post just under this one on the Main Page for this morning's offering.)

The graph above is monthly from December 26, 2008 to January 28, 2011, with one additional week added at the end – this week ending February 4, 2011.

continued...

The spread or contango from the Cash Market price and the most distant COMEX futures contract available has varied from as little as $0.108 in December of 2008 to as much as $1.277 in December of 2010 in nominal terms – that is to say it has been positive or in contango until now. As of yesterday, February 4, 2011, the spread turned to a negative or a “discount” of $0.049 or a rare zero contango futures strip.

In percentage terms the contango until this past week varied from as little as 0.8% two Fridays ago (January 28) to as much as 7.1% on August 28, 2009. This week (February 4) the most distant, December 2015 contract, traded to a discount of -0.2%.

It is most interesting to us here at Got Gold Report that the entire strip contango widened out considerably just ahead of the most recent silver price pullback. The spread widened to $1.286 on December 31, 2010. In just a month all of that spread; all the contango to the end of the futures curve has evaporated and is now replaced by backwardation.

In just one month and one week we have gone from the highest entire-spread contango in 26 months to essentially a zero-contango, backwardated market for silver, which speaks of extraordinary demand on the front end of the futures strip and confirms heavy physical demand – we believe.