Saturday, February 22, 2014

COMEX Feb-2014 Gold Contract Delivery: 341 contracts to go - Weekly Update

5,920 Feb-2014 contracts filed for delivery on first notice day January 31st.  As of last Friday, 3,639 have been settled and 1,940 have been 'lost' to delivery.  The trend looks very similar to the last major delivery contract month of Dec-13.  

Refer to my post from last week for more commentary and definitions.

Thus far in February, JPM, Deutsche Bank, and Bank of Nova Scotia have issued 45%, 12%, and 38% of all settlements.  HSBC and Barclays have stopped or taken ownership of 62% and 27% of all settlements.  

Month to date those who were short Feb gold futures contracts have been able to settle almost all open interest.  In order to cover, 208,686 ounces of gold were addded to registered COMEX inventory month to date, which increased registered inventory to 648,586 ounces.   About 75% of the increase or 151,019 ounces of gold was added to eligible inventory and is new to the COMEX system   The rest of the increase came out of eligible inventory.  In summary, 648,586 ounces was needed to cover 592,000 ounces of open interest on first notice day.  Gold prices are up 7% month to date, which helped acquire the additional gold for COMEX inventory and settlement.

COMEX eligible inventory is about 6.5 million ounces.  COMEX will not experience a delivery default with this much available gold.  Of course higher prices may be necessary to entice the owners to sell it.  

Here is an excellent post regarding the relevance of registered and eligible gold inventory at the COMEX by Bron Suchecki.  Thanks to Kid Dynamite for referring it.

Sunday, February 16, 2014

COMEX Feb-2014 Gold Contract Delivery: 746 contracts to go - Weekly Update

5,920 Feb-2014 contracts filed for delivery on first notice day January 31st.  As of last Friday, 3,286 have been settled and 1,888 have been 'lost' to delivery.  The trend looks very similar to the last major delivery contract month of Dec-13.  

Refer to my post from last week for more commentary and definitions.

Last week, Deutsche Bank joined JPM and Bank of Nova Scotia as major issuers.  Together they have issued 91% of the settlements this month.  HSBC and Barclays have stopped (taken ownership) of 89%.

Monday, February 10, 2014

COMEX Feb-2014 Gold Contract Delivery: 1,760 contracts to go

5,920 Feb-2014 contracts filed for delivery on first notice day January 31st.  As of last Friday, 2,549 have been settled and 1,611 have been 'lost' to delivery.  The trend looks very similar to the last major delivery contract month of Dec-13.  

As expected COMEX participants have recently added to registered gold inventory in order to satisfy settlement demand during the February contract month.  Registered inventory has grown from 439,900 ounces on January 31, 2014 to 657,395 ounces last Friday.

JPM Continues to Dominate Settlement Activity
So far this month JPM House Account and Bank of Nova Scotia House Account have issued or delivered 59% and 32%, respectively of all warrants for settlements of the Feb-14 contracts.  HSBC House Account has stopped or taken ownership of 64% and Barclays has stopped 25%.   Once again JPM House Account is the majority of the volume.  This month JPM is on the issue side after stopping 6,254 contracts or 96% of the notices during December 2013.  

Same As it Ever Was
History is repeating itself.  In December 2012 JPM House stopped 50% of the delivery notices.  And then in February 2013 JPM House issued 7,005 contracts which was 53% of the total.  During 2013 JPM with both their house and customer accounts went on to issue the vast majority of notices during March, April, May and June.  You might remember what happened to gold prices during that time.  

But, The Ammo is Running Low
Registered gold inventory at the COMEX is so much lower this year that it would be difficult for any participant to push prices lower.  For example, where could JPM get over 900,000 ounces of registered gold to issue now as they did last April between their house and customer accounts?  At the beginning of February 2013 COMEX had 2,295,000 ounces of registered gold in inventory.  To start this February COMEX had 439,900 ounces in inventory.  Of course JPM or any other participant can always get registered gold from the eligible inventory category by paying a higher price!  Last year at this time gold was $1,660/ounce.

Monday, February 3, 2014

US Mint Sales Jump, Really? - just like every January! Misleading headlines.

US Mint monthly sales of gold (Eagle and Buffalo) and silver Eagle coins are presented in the graphs below.  Even with my limited knowledge of the coin industry, I can see that dealers' purchases are seasonal.  Sales always jump up in January compared to prior month of December.  The more relevant comparison is to last year, where sales are actually down significantly.  Check out the misleading headlines below.

Also, be careful not to use January sales as an unbiased indicator of demand because supply may have been constrained.  The Mint may have started shipping 2014 coins later in January this year than last.  And, allocations of the new coins may have been smaller at the beginning of this year than in previous years.

This blogger seems to know the US coin business:

U.S. Mint Gold-Coin Sales Jump 63% in January; Silver Triples

US Mint Bullion Coins Soar to Highs in January Sales

Sunday, February 2, 2014

COMEX February Gold Futures: First Notice Day for Settlement: 57% fewer contracts than last year.

57% Fewer February Contracts File Notice on First Notice Day

Last Friday, the fifth and last Friday of January the total open interest (OI) in gold futures on the COMEX was 375,065 contracts of which 5,905 filed for settlement during February.  Friday, January 31 was first notice day.  Last year, first notice day for the February contract was Thursday January 31.  13,910 contracts filed notice last year on first notice day.

I was expecting at least 7,500 contracts to file notice.  Total open interest has been about 10% less than in 2013.  Yet notices filed on first notice day are down 57%.  In addition, the number of Feb-2014 contracts filed is down 42% from Dec-2013.  On November 27, 2013 the first notice day for Dec-2013 contracts 10,157 contracts filed.  The bullion banks were able to convince a lot of Feb-2014 contract holders to roll over to future dated contracts.  

Still No Brave Entrepreneurs Trying to Squeeze the Shorts 
Shockingly no enterprising hedge fund manager has tried to stand for delivery of enough contracts to really squeeze the shorts at the COMEX.  An investment of $740M could have doubled the number of contracts standing/filed last Friday.  A large amount of demand would drive up prices given that the COMEX banks' vaults have only 439,900 ounces of registered gold in inventory.  Last year at this time inventory was 2,925,000 ounces.  Higher prices would pry eligible gold lose so that it could be registered.  

We're still waiting for the 21st century Hunt brothers.  Carlos Slim, George Soros, Putin, could easily come up with several $100M.  Perhaps gold is more dangerous than silver because it's reserve banks turf.  Look what happened to the US Presidents that started to break the power of the reserve banks over gold and the US dollar.

Contracts Typically Lost to Settlement Even After First Notice
Those who are short the 5,905 Feb-2014 contract have yet to cover.  They must cover or issue warrants for delivery by the end of the month unless they can convince the long to accept an equivalent, which might be future dated contracts, GLD shares, or even cash.  Therefore, even though 5,905 contracts filed notice much fewer contracts could be settled by the end of February.  For example, 3,664 of the 10,157 Dec-2013 contracts filed on first notice day were 'lost' to settlement during the month.

Registered Inventory Could Prove Enough to Cover February 
Current inventory of registered gold could be enough to cover settlements during February if roughly 1/3 of Feb-2014 contracts are lost during the month.  This is rough because multiple contract can be settled with the same gold/warrant during the month.  Also portion of registered gold must be in the hands of owners who are not shorts who have yet to cover.  

But Shorts Will Soon Need Inventory for March and especially April which is typically a big settlement month.  The amount of leverage in the system continues to impress.  A month ago total open interest was 384,219 contracts, of which 215,736 were Feb-2014 expiry.  At the moment, 5,905 contracts are settling a month old obligation of 215,736 - over 36:1 leverage.

Note: last Friday's data as reported by the COMEX is 'preliminary'.  I will update this post when the final data for Friday is available.  Typically the final numbers are only slightly different from the preliminary.