Bill Holter: Comex Physical Gold & Silver Deliveries — The Elephant in The Room?
- An Elephant In The Room?
by Bill Holter, http://www.jsmineset.com/
Here we are again, just six days away from a major COMEX gold (and silver) delivery month with a huge outsized amount of contracts outstanding versus deliverable inventory. For a background, COMEX holds 2,083,000 (nearly 65 tons) of registered gold. This amount is much higher than it was last December when it stood at a miniscule 152,000 ounces (4.7 tons).
Since May of this year, something has drastically changed in the monthly amounts delivered. For all of 2015, only 51 tons were delivered which amounted to about 4.25 tons per month. If you recall, many months would arrive at first notice day with a huge amount of contracts open, only to see the contracts evaporate before the close of the delivery period. I postulated then and still believe, contract holders were offered premiums to “just go away” and not take delivery. I cannot prove this but you must ask, why someone would FULLY FUND their account to take delivery and then not follow through. It makes no sense other than if they were enticed not to take delivery after placing the full amount of funds in their accounts to settle delivery.
So far this year, 191 tons have stood for delivery, 168 of those tons since May. The average delivery since May has been over 24 tons per month with only two of the seven months being a traditional delivery month. June and August amounted to nearly 93 tons alone. The change since May has been astonishing. Rather than contracts being “bled down” each month (enticed by premiums offered?), nearly every single month has had more standing by the end of the month than were at the beginning of the month (nearly double in some cases). Another big change is, previously, the bulk of deliveries would be withheld until just before the end of the delivery period. Now, massive deliveries are being made on the 2nd, 3rd and 4th delivery days of the month. Please remember, it makes no sense to “wait” to make a delivery as storage fees add up for each day …it seems to me that it is now known that many contract owners cannot be enticed with premiums!
So why has this begun to happen, why are more contracts demanding delivery and why are they jumping queue and opening more contracts during expiration? I believe it is simply because there is either a greater “need or desire” for gold. If I had to guess, I believe the new and different demand is in large part a function of the Shanghai Gold Exchange opening in September. Immediately after opening, we saw close to $4 premiums for gold (versus COMEX and LBMA pricing) and around .50 cent premiums for silver. These premiums are now recently much higher! For the last few weeks these premiums have grown to the $10-$12 range for gold and over $1 for silver. The premiums shot up on Monday to $20.33 for gold and $1.35 for silver. This is obviously more than generous enough to allow massive arbitrage to occur.
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