LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

COT Gold, Silver and US Dollar Index Report - July 10, 2020
By: GoldSeek.com

Gold & Silver Seeker Report: This Week in Mining Issue #21 - Financing's Galore, Early Q2 Production Numbers, and Go
By: Chris Marchese, Chief Mining Analyst at GoldSeek.com

The Silver Pressure Cooker
By: Ted Butler

Gold Stocks Blast Higher
By: Adam Hamilton, Zeal Research

Banking on a Bluff: The Biggest Gold Scam in Modern History
By: Marin Katusa

Epochalypse Now: How Deep is Your Depression?
By: David Haggith

Stock market update: good time to be on the sidelines
By: Gary Savage

Precious Metals Update Video: Gold market a crowded trade?
By: Ira Epstein

Is it Time To Dump Gold Stocks?
By: Brady Willett, FallStreet

How High Can Gold Go in 2020?
By: Sam Laakso, VOIMA GOLD

 
Search

GoldSeek Web

 
Extreme COMEX Delivery Demand Continue


 -- Published: Wednesday, 1 July 2020 | Print  | Disqus 

Demand for physical delivery through the COMEX futures market continues, and this has significant implications for the future of the current fractional reserve and digital derivative pricing scheme.

It's now mid-summer and the July COMEX contracts have moved into their delivery phase. The numbers are as amazing as they are historic, thus this updated summary is necessary today.

Back in late March, the COMEX nearly failed, as Covid-related sudden delivery demands in the spot gold market drove massive losses for many of the Bullion Banks. Much has been written about this since, so there's no need to recap what happened. However, a handy summary—including an easy-to-understand explanation of the COMEX "delivery" process—can be found here: https://www.bullionstar.com/blogs/ronan-manly/the-...

Due to this near failure, the CME Group and the LBMA rushed to turn the COMEX futures market into a physical delivery vehicle in a desperate attempt to restore legitimacy to the derivative-only trading that takes place there. Remember, without underlying physical delivery, a commodity futures market might as well be trading baseball cards. Some physical delivery MUST be made at the futures contract price, otherwise the price discovered through futures trading is utterly illegitimate and fraudulent.

In late March, the CME and LBMA rushed to market a new contract that purported to "deliver" fractional ownership certificates in 400-ounce London Good Delivery Bars held within the LBMA vaults. Additionally, the CME publicly encouraged the use of COMEX contracts for physical delivery, and in doing so may have sealed their fate. We wrote about this on March 31 and strongly encourage you to re-read this link now:

 https://www.sprottmoney.com/Blog/the-cme-opens-pan...

Three months later, it's clear that the CME has indeed opened "Pandora's box" and the Bullion Banks that operate on COMEX are desperately trying to hold the entire pricing scheme together.

Let's start with COMEX gold...

Over the past several years and for as far back as I have records, an average "delivery month" for COMEX gold sees anywhere from 6,000-10,000 "deliveries". In the period 2015-2019, the highest amount of monthly "deliveries" came in June of 2016 with 15,785 contracts. The lightest delivery month in this period was just 922 contracts in April of 2017. For the sake of this current comparison, note that April of 2019 saw 7,149 "deliveries" and June saw just 2,522.

Again, to restore legitimacy to their COMEX exchange, the CME Group openly moved to make the COMEX a delivery vehicle in April of this year, and the result is astounding:

 For the delivery month of April 2020: 31,166 total deliveries

 The non-delivery month of May 2020: 10,277 total deliveries

 The delivery month of June 2020: A blowout of 55,102 deliveries

 On just the first day of the non-delivery month of July: 3,316 deliveries

Obviously, these numbers are astounding and highly unusual when compared to COMEX history. At 100 ounces per contract, the 55,102 deliveries in June amount to 5,510,200 ounces or about 171 metric tonnes of gold.

Oh, and be sure to note that ALL of these deliveries are taking place through the traditional COMEX Jun20 futures contract. Remember that new contract mentioned above? The one that purports to "deliver" fractional ownership certificates in London bars? The total amount of Jun20 "deliveries" for this contract was...wait for it... EIGHT. Not 8,000 or even 800. Just EIGHT. It certainly appears that the global gold market immediately recognized this new contract for what it is...

So for gold, in summary, the physical delivery crisis continues unabated and it appears that COMEX will be under delivery distress for the foreseeable future. How many contracts will ultimately be filled in July? How many might stand in August? We'll have to wait and see, but the ongoing spread between the Aug20 contract and the spot market indicates that this problem isn't going away soon.

But here's the interesting thing—and this is what typically happens when you open Pandora's box—all sorts of unintended, unforeseen consequences follow. What do I mean? Well let's check COMEX silver. Recall from late March, all of the headlines and stories about "logistical issues" and metal simply not being "in the right place" pertained exclusively to gold and NOT silver.

Similar to COMEX gold, I have delivery totals for COMEX silver dating back to 2015. The largest amount of monthly "deliveries" was in September 2019 with 8,722 contracts. The smallest was 1,356 in March of 2016. On average, a typical COMEX delivery month sees about 3,000-4,000 "deliveries". But this has changed this year, too!

The month of May was a delivery month for COMEX silver, and the total amount of contracts actually delivered hit 9,044. While not a new record, this was still about 2X the historic average. And now the next delivery month of July has begun, and it looks to be a doozy.

When the contract went off the board Monday, June 29, there were still an incredible 16,834 contracts open and apparently "standing for delivery"! Not only is that about 4X the historic average, it also represents a delivery demand of 84,170,000 ounces of silver. While the COMEX vaults allege to hold over 320,000,000 ounces, only 90,648,055 ounces are currently marked as "registered" and available for immediate delivery. Though eligible silver can be converted into registered in a keystroke, the amount of silver needed for delivery certainly represents a problem for the Bullion Banks.

Will these Banks meet all of these delivery demands over the course of the month? Of course they will. But what will happen in September? Now that Pandora's box is open, will silver follow gold and see an even higher number in each successive month? We'll see.

One thing we do know, however, is that the CFTC continues to turn a blind eye to all of these shenanigans. For example, one might think that the chief U.S. commodities regulator might take an interest in the blatant abuse and disregard of their stated position limits. However, if one thinks this, one is demonstrably wrong. What do I mean?

The stated COMEX and NYMEX position limits were recently increased, and the press release can be found here: https://www.cmegroup.com/notices/market-regulation...

Please see the table below from James Anderson:

So we must wonder if any of the "Inspector Clouseaus" at the CFTC will even notice that on the first day of Jul20 COMEX silver deliveries, the House (proprietary) Account of JPMorgan is clearly in violation by issuing/delivering 5,975 contracts. Even with the recent changes, that's still 2X the mandated position limit. Since you can be assured that no regulatory action will be taken, this is simply just another reminder that the rules only apply to you and me—and not The Banks.

One more thing on that chart above...be sure to note that the total amount of deliveries for the Jul20 silver contract is already 11,458. That's nearly 3,000 more contracts delivered on THE FIRST DAY than the entire previous all-time high MONTH of September 2019!

So, anyway, let's just conclude with this. Please do not rush out of here thinking that the COMEX will soon collapse. The weight of all this delivery demand may eventually lead to a force majeure-style failure, but that's very likely not coming this month or next. The CME, the LBMA, and The Banks will work to protect their pricing scheme until the very last moment, so it would be foolish to think they're going to meet a quick end.

However, their fate was sealed in late March, and like a dying animal, the spasms of their death throes are clearly visible...if you know where to look. To that end, I hope you found this post to be helpful.

About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.



Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.


| Digg This Article
 -- Published: Wednesday, 1 July 2020 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.