Thursday, April 3, 2014

COMEX Gold Futures: 2,642 Apr-2014 contracts settled on the first day!

More April contracts file than Feb contracts
On Monday 6,015 contracts filed which is slightly more than the 5,920 Feb-2014 contracts that filed on first notice day.  Surprisingly almost all 6,486 of the open interest from last Friday filed on Monday.  And, then on Monday 2,642 contracts settled.  That's a lot of gold changing hands on the first day.  

On first notice day for the Feb-2014 contract only 55 contracts settled.  And, it took 7 business days for over 2,600 contracts to settle.   Only 68 contracts settled on first notice day for the Dec-2013 contract.  

Why the big rush?
It is the short who must file and 'deliver' the metal.  And therefore I presume that the short has until the end of the contract month to obtain and present the requisite warrants.  I need to re-read the CME rule book to confirm this - or maybe you can.  The JP Morgan house account has issued 59% of the warrants month to date.  Bank of Nova Scotia has been the largest recipient or stopper of this gold.  Why did Scotia need this gold so soon?  And, why did JP Morgan give it to them?

Is JP Morgan's Powder Running Dry?
In Dec 2013 JP Morgan house account stopped 6,254 gold contracts after issuing multiples of that during Q2 2013.  Year to date JP Morgan house account has issued 4,323 which is almost 70% of the gold stopped in December.  Could the JPM house account be down to less than 200,000 ounces?  Maybe.  But I wouldn't be on it, because JPM can always get more.  Rumor is that Ukraine is 'sold' out, but there are other opportunities.  And some believe that JPM is a front for the Fed.  And the Fed is believed to still have physical control of a few thousand tons.

COMEX gold inventory has been growing lately.  I expect to see some significant withdraws soon given the rush in recent settlements.  Why rush if you are planning to keep you gold in the system?

6 comments:

  1. Rik - you noted "It is the short who must file and 'deliver' the metal" - that's correct: the short decides when during the delivery month to make delivery. so the question "Why did Scotia need this gold so soon?" is moot. Scotia had nothing to do with the decision.

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    1. Thanks KD.
      I am assuming that Scotia was able to convince JPM to 'deliver' the metal, because I cannot think of any other reason why JPM would issue it so early in the process/month.

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  2. BTW dear readers, I put quotes around deliver because gold is not necessarily physically moved or delivered. Settlement is achieved by transferring warrants which are evidence of ownership. So delivery is simply warrants changing hands which I assume is done electronically.
    Refer to Kid Dynamites years old posts for more info - or you can read the CME rule book.

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