gene arensberg comments on backwardation in gold and silver:

Backwardation in Both Gold and Silver

Perhaps the most interesting news this week is that both gold and silver futures ended the week in moderate backwardation, where the cash or spot price was higher than the front active contracts. In the case of gold, cash gold closed at $1,045.70, fully $5.30 above the December contract as shown in the table below courtesy of Barcharts.com. Indeed, this time the backwardation is actually strong enough that the cash price was higher than all the contracts going out to August of 2010.

Barcharts.com

Backwardation is rare and unusual in the metals futures markets, but this week we see the same thing with silver as shown in the table just below.

Barcharts.com

While backwardation by itself does not guarantee that the metals will advance in price, it is most definitely viewed by many analysts and traders as a much more bullish than bearish condition. We need to take note and to trade accordingly. All else being equal, both gold and silver should, repeat should, remain well bid on most any dip in the near term, especially given the over-sized commercial net short positioning detailed below in the Gold and Silver COT sections.

http://www.stockhouse.com/Columnists/2009/Nov/3/Got-Gold--Report--Gold,-silver-futures-in-backward