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

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page >> News >> Story  Disclaimer 
Latest Headlines to Launch New Website

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA


GoldSeek Web

Why Physical Gold Delivery on the COMEX in New York is Elevated

 -- Published: Thursday, 23 July 2020 | Print  | Disqus 

Jan Nieuwenhuijs, VOIMA

Three elements cause physical delivery on the COMEX to have reached record highs this year: strong demand for futures in New York, a persisting spread between the price of futures in New York versus spot gold in London, and arbitrage.

Physical delivery on the largest gold futures exchange in the world, the COMEX in New York, has reached all time highs this year. In June more than 170 tonnes were physically delivered (5.5 million ounces). Usually, delivery is “neglectable.” What has changed?


An important change in the global gold market occurred on March 23, 2020. On that day the price of gold futures in New York started drifting higher than the price for spot gold in London. Ever since, the spread has persisted, though it continuously widens and narrows. The reason for this disturbance in the market can be read in my previous article “What Caused the New York vs. London Gold Price Spread and Why it Persists.”

To understand the shift in deliveries, first let's have a look at how the global gold market operated before March 23, when things still ran smoothly.

The Global Gold Market Before March 23, 2020

The world’s most dominant gold spot market is the London Bullion Market, where mostly “loco London” gold is traded. Meaning the metal is physically settled within the environs of the M25 London Orbital Motorway. The most dominant gold futures market is located in New York, where metal can be physically delivered within a 150-mile radius of the City of New York.  

Before March 23, the price in London (spot) and the price in New York (near month futures contract) always traded in tight lockstep because of arbitrage. If, for example, the futures price would trade above spot, arbitragers would “buy spot and sell futures” until the spread was closed. Arbitragers would hold their positions—long spot, short futures—until maturity of the futures contract, because at expiry the price of the futures contract was guaranteed to converge with the spot price. In this example we can see that strong demand in New York would be translated into spot buying in London.

Worth noting is that when a futures trader rolled its position into the next month, and his initial futures buying was translated into spot buying in London by an arbitrager, on a systemic level the arbitrager would roll its position as well.

Of course, the opposite happened as well. When futures traded below spot, arbitragers would “buy futures and sell spot” until the spread was closed.

So far, a simplified version of the market before March 23.

The Global Gold Market After March 23, 2020

Since March 23 of this year, futures have persistently been trading above spot, though the spread isn’t constant. As a result, arbitragers aren’t assured the futures price in New York will converge with the spot price in London. An arbitrage trade as described above, through a position in both markets, incurs risk.

What arbitragers currently do to profit from the spread is buy spot, sell futures, fly the metal to New York, and physically deliver the gold. This is how the profit is locked in. If the spread between spot and futures is $40 per ounce, the arbitrager’s profit is $40 minus costs for transport, insurance, storage, etc.

Now you can see why the persistent spread between New York and London has increased physical delivery on the COMEX through arbitrage.  


Physical delivery on the COMEX is elevated because of the current unusual situation in the global gold market. The gold delivered in New York has been imported from spot markets such as Singapore, Switzerland and Australia. U.S. imports directly from the U.K. are rare, because in London 400-ounce bars are traded and the main futures contract in New York requires smaller bars for delivery.

You might wonder who takes delivery from arbitragers that make delivery on the COMEX. Possibly, these are arbitragers, too. In the chart below you can see the spread between the “near month futures contract” and the “next near month futures contract.” This spread has also blown out on March 23. Arbitragers can buy the near month, and sell the next near month for a higher price. Subsequently, they take delivery of the near dated contract and make delivery of the further dated contract.

At the time of writing the near month (August) is trading at $1,849.8 dollars, while the next active month (October) trades at $1,860.5 dollars. Arbitragers can buy long August and sell short October to collect $10.7 dollars per ounce.

One reason I can think of why the spreads persist, is because bullion banks are currently less active on the COMEX. Previously, bullion banks—having access to cheap funding—often performed the arbitrage trades.

All charts provided by

Jan Nieuwenhuijs, VOIMA

The views expressed on Voima Insight are those of the author(s) and do not necessarily reflect the official views or position of Voima Gold. 

You are allowed to copy our content, in whole or in part, provided that you give Voima Gold proper credit and include the appropriate URL. The name Voima Insight and a link to the original post must be included in your introduction. All other rights are reserved. Voima Gold reserves the right to withdraw the permission to copy content for any or all websites at any time.

Nothing written in Voima’s blog or website constitutes investment, legal, tax, or other advice. It should not be used as the basis for any investment decision(s) which a reader thereof may be considering. The purpose of Voima’s blog is to provide objective, educational and interesting commentary and is not intended to constitute an offer, solicitation or invitation for investing in or trading gold.

| Digg This Article
 -- Published: Thursday, 23 July 2020 | E-Mail  | Print  | Source:

comments powered by Disqus


Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to >> Story

E-mail Page  | Print  | Disclaimer 

© 1995 - 2019 Supports

©, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of 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 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


The views contained here may not represent the views of, Gold Seek LLC, its affiliates or advertisers., 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, Gold Seek LLC, is strictly prohibited. In no event shall, 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.