This article takes a look at supply and demand in Silver and drills down further. The author (Dr. Keith Weiner – president of the Gold Standard Institute USA, and CEO of Monetary Metals) states that supply and demand consist of two spreads.
“The basis is the profit one would make to carry metal (i.e. to buy a bar and sell a contract to deliver it in the future). The cobasis is the profit to decarry it (i.e. to sell a bar and buy a contract to get it back in the future). In general, if the basis is high and rising then we know that the marginal demand for metal comes from the warehouseman. If the cobasis is positive and rising then we know that the marginal supply of metal comes from the warehouseman.”