Contango in gold vs. backwardation in silver

I've written several blogs on why backwardation indicates physical spot shortage and is bullish for a commodity, so readers can do a search for "backwardation" to find the previous blogs.  Also, previous blogs may have described the contango in oil markets, and how speculators were taking delivery of barrels of crude oil, and storing them in supertankers in order to take advantage of higher prices on later delivery months.  That strategy only made sense if the contango was wide enough to justify the inventory costs (as well as opportunity cost).

But since a picture is worth a thousand words, here are a couple charts on the contango in gold and backwardation in silver.  A contango is normal because it's plausible that futures prices are higher than the spot price, as markets discount in the cost of owning inventory, namely storage, insurance, and security.

By contrast, backwardation indicates an immediate physical shortage, as sellers scramble to find inventory to deliver to buyers, and are forced to bid up prices once they do find supply.  My ad hoc surveys and visits to coin dealers and the US Mint in Denver confirms the tightness in the physical silver market.

Click on images to enlarge.  Credit goes to sharelynx.com for the charts.