by Keith Weiner, Sprott Money:

A few days ago, we wrote about a big silver crash. The price dropped around 7.5%.

And the basis dropped from around 2% to 0.6%. At the end, we said.

“The key question is: what is the follow-through? If the price stays down and the basis goes back up, that will be a bearish signal. If the basis stays down, that means the silver market is markedly tighter at $24.50 than it was at $26.75.”

Which this brings us to yesterday’s silver dive.  Here’s the graph of the day’s action.

At the start of our graph, 2am (London time) the price is just a bit lower than at the end of the first crash day. $24.25. But we see the basis is up to 2.3%. That’s higher than it was at the beginning of the first crash day, when the price was $26.75.

Clearly, there was some buying of futures in the meantime. Perhaps speculators were betting on a quick spike in price.

Over the course of the day, the price drops to around $22.80. This is a drop of 6%. And the basis ends at around 1.5%.

So, yes, there is a drop in basis. From a higher level than on the first crash day when the price was much higher. To a higher level than at the end of that day. And not that big a drop.

The selling was driven by futures, yet… yet… there was plenty of selling of metal too.

We are now $4 down in price, and the basis is not down very much. That means the abundance of silver to the market at $22.80 is not much less than it was at $26.75.

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