Gold and Silver Markets Plunge into Rare Backwardation Signal
The phenomenon of backwardation in gold and silver markets occurs when spot or near-month futures prices trade above longer-dated futures, effectively flipping the market's cost-of-carry structure upside down. This situation signals that traders are willing to pay a premium for metal right now instead of later.
The recent instances of backwardation in 2025 were triggered by tariff fears and delivery bottlenecks. In December 2024 through February 2025, the COMEX-London EFP spread reached roughly $50 to $60 per ounce due to fears that US tariffs might apply to imported bullion. This led to a record outflow of 151 tonnes of gold from London vaults in January 2025.
Another instance occurred in August 2025, when the White House reclassified Swiss one-kilogram and 100-ounce gold bars under a tariff-liable code, causing New York futures to spike. The premium over London spot briefly topped $125 before easing toward $101 within hours.