Tuesday, November 12, 2013

COMEX Dec Gold Future Contracts OI Down 30% While Registered Inventory is Down 75% from 2012

The current number or open interest (OI) of COMEX gold future contracts for December 2013 delivery is 183,966, which is 30% less than at this time last year.  COMEX future contracts are for 100 ounces.  If all of the current December gold futures contract owners stood for delivery in December the COMEX would need to deliver 18.4M ounces or 572 tonnes.  For reference, about 3,400 tonnes of gold are mined annually worldwide http://pubs.usgs.gov/of/2013/1091/OFR2013-1091.pdf  

The COMEX currently has 223 tonnes of gold stored in its custodian's vaults.  203 tonnes of this gold is reported as eligible, which means that it is owned by others who have warrants to claim it.  The COMEX vaults are storing this gold which is 'eligible' to be reclassified as registered gold in the event that the owner decides to sell it.  20 tonnes of the COMEX inventory are currently registered and available to deliver to futures contract holders who stand for delivery.

The COMEX has 20 tonnes of gold to cover a potential demand of 572 tonnes in December alone.  The situation seems extreme.  But, somehow the COMEX has avoided a delivery default and cash settling future contracts in all previous months.  December contracts are very popular so a comparison to last year at this time is more instructive than comparisons to previous months of 2013.  

Going in to year-end the COMEX currently has proportionally fewer ounces to cover December contracts.  Open interest for December contracts is down 7.8M ounces or 30% from this time last year.  And, inventory of registered gold is down 1.9M ounces or 75%.  The charts of COMEX registered gold inventory over time that Jesse publishes show that about 1.0M ounces were added to inventory in mid-December last year.  Then the inventory dropped back down by 1.0M ounces in January 2013.  This gold was presumable delivered to Dec 2012 contract holders who stood for delivery, but one cannot be sure.  It must be possible for the COMEX to negotiate delivery from other sources of gold to satisfy delivery demands, as well.

All I want for Christmas is for just 10% of the December contract holders to stand for delivery and publicize when the COMEX forces them to settle for cash instead of bullion.  This charade has gone on long enough!      
http://jessescrossroadscafe.blogspot.com/2013/11/claims-per-ounce-of-deliverable-gold.html




















http://harveyorgan.blogspot.com/2012_11_04_archive.html

4 comments:

  1. "It must be possible for the COMEX to negotiate delivery from other sources of gold to satisfy delivery demands, as well."

    Aka, HSBC or Scotia Mocatta.

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    1. My high level understanding is that total registered gold inventory as presented in Jesse's charts and by Harvey Organ includes bullion at JP Morgan, HSBC, Scotia, and Brinks. Harvey refers to it as 'dealer' inventory. This is the inventory data that I presented in the tables above.
      My speculation is that there are other sources outside of these 'custodial' banks. I suspect that COMEX could provide a warrant or warehouse receipt for bullion at any facility to satisfy the terms of delivery for futures contracts.
      So focusing only on inventory at the custodial banks is just part of the equation for calculating when COMEX will run out of physical.
      Several other bloggers who claim to have read the COMEX gold future contract believe that they allow for cash settlement. So the COMEX will have a delivery default not a legal default if/when they run out of bullion.
      I still don't understand why anyone would buy a gold future if the COMEX can force cash settlement. But that's another discussion.

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  2. I believe a number of either buyers or central banks requiring repatriation of gold reserves could create a major problem. They do not because they know that to do this would destabilize the entire Global monetary system. These players don't want this. So they buy slowly to impoverish rather than mug the West.

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    1. Yes, I think the central banks (including China, Russia and India) work together to avoid destabilizing the global monetary system. Germany agreed to accept the return of their gold kept in the US over many years, for example. My sense is that the COMEX which is mostly paper gold is not affected by central bank dealings in physical. It's a totally different league. The COMEX has 19.9 tonnes in inventory and China imported 109 tonnes in September alone. (http://koosjansen.blogspot.nl/2013/11/greater-china-net-import-1316-tons-ytd.html). And global annual gold production is about 3,400 tonnes. The COMEX is too small to matter to the Central Banks, except that is where the accepted market price of gold is set. It must be tempting for a central bank to 'contribute' a few tonnes to suppress prices for a couple more months!

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