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Katchum
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Albert Sung is the author of Correlation Economics, monitoring breaking economic news on a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at Ashland, a... More
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Correlation Economics
  • The Correlation Between Open Interest And COMEX Stock Levels 2 comments
    Dec 18, 2012 4:20 PM | about stocks: GLD, SLV

    Just a few days ago, I reported that J.P. Morgan vault had a significant amount of eligible gold (NYSEARCA:GLD) taken away. I didn't know what it meant.

    Today, another 175000 eligible gold was taken away, this time by HSBC and J.P. Morgan, who are seen to be the main manipulators in the precious metals market.

    This is all nice to report, but I still don't know what it physically means.

    But let's try to understand the CFTC market and COT data.

    First off, when open interest increases in gold (Chart 2), it means that inventory needs to be replenished. Analogy: if you get increasing orders (higher open interest), you should have a higher stock level to meet demand.

    So if open interest increases on Chart 2, registered bullion stock levels should go up too on Chart 1. We can see that Chart 1 and Chart 2 correlate very well. Also, Chart 3 and Chart 4 correlate very well too.

    Gold:

    (click to enlarge)

    Chart 1: Gold COMEX Stock

     

     

    (click to enlarge)
    Chart 2: Open Interest Gold

    Silver:

     

     

    (click to enlarge)
    Chart 3: Silver COMEX Stock
     

     

    (click to enlarge)
    Chart 4: Open Interest Silver

    If for one or another reason, the open interest goes up, while the inventory doesn't go up, then we have a problem. The most likely reason is a shortage of bullion gold/silver. That's when you need to worry about physical shortages. So that's important to monitor.

    So actually it's very handy to monitor the COMEX stock levels and compare it to the open interest chart of the CFTC.

    Disclosure: I am long PSLV, AGQ.

    Stocks: GLD, SLV
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Comments (2)
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  • phdinsuntanning
    , contributor
    Comments (1290) | Send Message
     
    well, if it is not there is because they sold it,
    sorry for your Sprotts and Ultra long silver positions:
    collateral damage. And still very far from average
    production costs.

     

    Best luck @ 2013 !
    19 Dec 2012, 01:35 PM Reply Like
  • Katchum
    , contributor
    Comments (556) | Send Message
     
    Author’s reply » If they can keep the gold and silver price at this level till the end of 2013 or 2014, I would be really surprised.
    19 Dec 2012, 02:23 PM Reply Like
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