On 23rd July, we said, “Well, it’s complicated.”

The action on 27th July was not.

Notice the big drop in basis starting around midnight (London time). It falls from over 7% to under 2%.

To refresh: Basis = Future (bid) – Spot (ask)

For the first two and half hours, the spot price is not moving. So, the only way the basis can drop is if the price of the September silver future is dropping. In other words, selling of futures. But while that was going on, there was enough buying of spot to keep it steady.

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Then, perhaps some market participants became aware of the buying of spot. Or perhaps some other buyers got excited. Somebody was buying in size, because between around 2:30 am and 3:00 am, the price shot up from around $23.10 to $24.40. Up +$1.30.

After that, the price jitters sideways but ends up to about $24.65. And the basis ends up around 3%. There are periods when basis correlates with price, e.g. from 10:00 to 14:00. During these periods, the price was driven by speculators in the futures markets positioning and repositioning.

And there are also times when they move in opposite directions, e.g. from 6:00 to 7:30. This means that price was driven by buying and selling of physical metal.

It is important to note that the price of silver went up, a lot, while the abundance of the metal to the market went down a lot. The Monetary Metals silver basis reading for Friday was 5.3%.

We have written a lot in recent months about the absence of the market makers. This is why the basis has been so high. If the market makers came back, we would expect the basis to be pulled in quite a bit.

We do not believe that this occurred, suddenly, between midnight and 3 am Monday morning in London.

There is now a ferocious buying of silver metal. And of course, with this, a breathtaking plunge in the gold-silver ratio. From its COVID-19-induced peak of 125, it has dropped now well below 80.

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.