Canary in the coal mine
Excerpt: http://news.silverseek.com/SilverSeek/1213201099.php
According to one hypothesis, permanent backwardation in silver will precede that in gold. Thus silver is the "canary in the coal mine". But you have to have ears to hear the canary sing. In other words, you must be able to read the message carried by the silver basis. If deflation and depression is in store, then the case for silver is not so clear-cut, in view of silver's extensive industrial applications. It is possible that silver will be dumped by investors fearing that industrial demand is vanishing. But again, it is also possible that the rush into gold, a regular feature of depressions, will spill over as a rush into silver. Whatever happens, the silver basis will provide a reliable early warning sign. The return of contango in silver is an indication that bullion banks are dumping silver.
Continued backwardation is an indication that investors and bullion banks are still accumulating silver. Investors and traders would do well to learn all they can about the silver basis to be able to interpret events correctly as they unfold, even if they never intend to trade the silver basis.
Silver Basis Contango/backwardation
http://www.lbma.org.uk/?area=stats&page=sifo/2009sifo
