Is COMEX Running Out of Gold? 7 comments
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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
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This article has 7 comments:
It's also possible that the ECB "sale" was purely an accounting entry to formalize the termination of a long-standing lease [read sale] dating back to the heyday of the gold carry trade.
Those 35 tonnes could have been sold and rolled since last century.
Even a simple understanding of the COMEX delivery process shows Avery's theory to be totally off base. There is plenty of gold around in the form of 100 and 400 oz bars.
pique!
It shows nothing of the sort. In fact, it shows that the ratio of gold to longs is at roughly 40%, well off its peak of nearly 60%. It also shows that these "gains" in COMEX stocks have been achieved wholly through additions to the "eligible" category, while everyone knows that deliveries are made from the "registered" category. if one views the chart correctly, one can see that fully two-thirds of the gold in COMEX stock is "eligible", meaning that the "registered / long" ratio is near an all-time low, I'd eyeball it at about 15% or so.
Keep taking delivery and we will get to see how many "eligibles' will be willing to part with their physical.
Thanks for the chart, very revealing.
I wonder if the large quantity of "eligible" gold is from owners who may find it a bit more profitable to put their bars into an ETF and then trade those shares rather than putting them into COMEX receipts, which does involve a cost, and then delivering those. Probably not more than a 20 or 30 cent difference, but when you are doing 10,000-100,000 oz lots it begins to make sense.