The “blogosphere” has been all atwitter with stories of the COMEX [Commodity Exchange] warehouses running out of gold. There was interesting speculation about the motives behind the ECB’s recent sale of gold. The ECB happened to sell gold on the exact same day that Credit Suisse (CS) had to make a large delivery of gold (for more check out this link). Despite the ECB’s recent brush with openness it is highly unlikely that we will ever find out if this was pure coincidence or a calculated bailout.
This incident did peak our interest in the amount of gold in the COMEX warehouses. If Credit Suisse did indeed have a delivery issue it could indicate COMEX warehouse stocks were depleted. We were highly skeptical of this speculation as on any given day over 20 million ounces of gold could be purchased at the London Bullion Market.
Our skepticism was confirmed with the release of the World Gold Council’s Q1 report on gold. In the report they provide a chart on the amount of COMEX gold stocks as a percentage of long positions.
Click to enlarge:
The chart clearly shows the amount of gold in the COMEX warehouses vs. long positions is at all time highs. In fact, during Q4 2008 the percentage of stocks vs. long positions hit a 5 year high. This occurred while the financial markets were melting down and demand for physical gold was surging. While there have been shortages of coins and small bars the availability of large bars has actually increased as a percentage of long positions.
Disclosure: I am long GDX