"Not unlike the inverse yield curve for bonds, which is when short term rates exceed long term ones, backwardation is when spot prices for commodities pull ahead of the futures market. Normally, the precious metals market charts similarly to that of interest rates, with near term prices cheaper than longer term ones, which carry elevated risks of unforeseen change, as well as increased carrying costs."
"In the last half century, apart from minor incidents, silver has entered deep backwardation on two prior occasions: during the 1980 Hunt Brothers' cornering of the physical silver spot market, and during the Covid-19 pandemic. This time, silver reached an all-time high spread differential of $2.88 between spot and futures, vs. the previous $2.50 high set during the Hunt Brothers' event. In fact, the backwardation of silver even spread to the gold market, which spooked traders around the globe."
On October 12th the silver market entered backwardation, a condition where spot prices exceed futures prices. Backwardation for silver is rare and previously occurred during the 1980 Hunt Brothers' cornering and the Covid-19 pandemic. Silver hit a record $2.88 spot-to-futures spread, surpassing the previous $2.50 high. The backwardation spread into the gold market and caused global trader concern. LBMA officials responded to calm markets. Many analysts anticipate this signal may precede a major reordering and revaluation of the silver market. Historical forces and alleged artificial price suppression shaped long-term gold-silver relationships.
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