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In last week's report, we covered how registered COMEX gold inventories continued to drop even with the rising gold price and this was in contrast to eligible gold inventories, which had a small rise. This week was a very quiet week at the COMEX gold warehouses, but registered gold still continued to drop. This week registered gold dropped below 700,000 ounces for the first time ever.

This is something that should be very relevant to investors who own physical gold and the gold ETFs (GLD, PHYS, and CEF) because any abnormal inventory declines may signify extraordinary events behind the scenes that would ultimately affect the gold price.

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Source: http://www.sharelynx.com

As you can see on the chart above, after the large decline in both registered and eligible gold stocks since the end of 2012, we are now seeing some stabilization in gold inventories. We will take a closer look at these numbers but let us first explain the COMEX a little more for investors who are unfamiliar with it.

Introduction to COMEX Warehousing

COMEX is an exchange that offers metal warehousing and storage options for its clients. The list of their silver warehouses can be found here and their gold warehouses can be found here. In the case of silver and gold, the metal is stored at these official warehouses on behalf of banks and their clients and can be used to settle futures contracts, transferred between clients, or withdrawn from the warehouse. This offers large holders of precious metals a convenient way to store their metal with minimal storage fees - very convenient indeed if you hold large amounts of gold or silver and you don't want to store them in your basement.

Silver and gold stored in these warehouses can fall into two categories: Eligible and Registered.

Eligible metals are those that conform to the exchange's requirements of size (1000 ounce bars for silver and 100 ounce bars for gold), purity, and refined by an exchange approved refiner. Eligible metals are stored at COMEX warehouses on behalf of banks or private parties, but are not available for delivery for a futures contract.

Registered metals are similar to eligible metals except that these metals are also available for delivery to settle a futures contract. COMEX issues a daily report on gold, silver, copper, platinum, and palladium stocks, which lists all the metal that is currently stored in COMEX warehouses and how much eligible and registered metal is present.

This information allows investors insight into how much metal is currently backing COMEX futures contracts, what large gold and silver owners are doing with their metals, and how many clients are requesting delivery of their metals. There is a lot more to glean from this information but for the purpose of this article we will focus on the gold drawdown.

This Week's Changes: Large Decline in Registered Gold as it is Transferred to Eligible Gold

Let us now take a deeper look at the gold draw-downs being seen in the COMEX warehouses.

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As investors can see in the table above, there has been a consistent decline in COMEX gold inventories since December. Last week we saw eligible stocks of COMEX gold continue to increase slightly by 11,387 ounces, while total COMEX gold declined by a small 4,667 ounces. This gives us three weeks of eligible gold increases (even though they were small increases) but total gold has hardly changed.

Let us now take a look at registered gold stocks.

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Last week's registered gold stocks had a decline of 16,054 ounces, which was small but continued the decline in gold available for delivery.

What does this Mean for Gold Investors

We are continuing to see stabilization in COMEX gold reserves over the past few weeks as eligible gold inventories climb slightly, but the interesting thing is that registered gold continues to drop. This seems to reinforce the tightness in the physical gold market that is being reported by many investors.

We believe this means the situation is still very bullish for gold investors. While COMEX is not the primary reason we invest in gold, it is very interesting to see that as the gold price has risen 15% from its July lows, inventories at the COMEX have not increased and registered gold continues to decrease. Maybe it is that physical gold investors are looking for much higher gold prices before investors start allowing their gold to be used for settling COMEX contracts, right now it seems there is a short supply of entities willing to offer their physical gold to settle delivery.

Therefore the situation is still very bullish for investors in physical gold and the gold ETFs (GLD, CEF, and PHYS). Investors interested in leveraging this situation into higher potential profits may also consider buying gold miners such as Newmont (NYSE:NEM), Goldcorp (NYSE:GG), Yamana Gold (NYSE:AUY), the Market Vectors Gold Miners ETF (NYSEARCA:GDX), or any of the other gold miners. Though we always caution investors should remember that gold miners are not necessarily an investment in gold - make sure you do your research before you invest in the miners.

All in all a quiet week at the COMEX gold warehouses, but registered gold continues its long decline, it will be interesting to see what happens to the inventories as we enter gold's annually strong fall season.

Source: COMEX Gold Inventories: Quiet Week But Registered Gold Drops Under 700,000 Ounces