The swing towards backwardation in the silver futures is just more evidence yet that supply of bullion is indeed thin. The shrill denials coming from the usual suspects get plenty of airplay but the facts tell us a different story.

Jeffery Christian was even posting on a chat forum to suggest that there is plenty of bullion around. I think those who take that kind of commentary seriously have failed to understand the difference between paper bullion and real silver bullion. There will always be plenty of paper bullion around. The gamblers that want to flip the silver ETFs will always have unlimited trading power to move that paper around. The shorts that pile on to drive spot silver lower have an unlimited supply of paper bullion to dump in the market. However those that are interested in the real metal, such as industrial consumers, there is less and less to go around.

China has been importing more silver the last year than all of the estimated demand for the entire world, as per the numbers circulated by the shills that run the bullion consulting outfits. This is the real bullion variety and not the paper scam that the dummies in the west are falling for.

There was some discussion on this forum last month that rising interest rates would kill the gold and silver bull market. This of course is nonsense, but today we get further evidence of why the metals must rise with interest rates. The decision to raise the rates in China is a confirmation that inflation is rising. Until interest rates are set higher than the rate of inflation, inflation will continue to be the dominant factor on the metals. Also, as interest rates are increased in China the yuan will appreciate and make bullion slightly cheaper for Chinese to buy. This is a no-brainer. Since the real metal demand is coming from China and the rest of Asia, metals prices are going to continue rising right along with the rates.

cheers!

mike