Comex Gold Inventories Collapse By Largest Amount Ever On Record

Includes: GLD
by: Patrick MontesDeOca

For the last few months, I have been warning my subscriber base to take a serious look at the reality of the unfolding collapse in the monetary system as we know it. It's happening in front of our eyes and you need to be aware and prepare for what is coming. I've published numerous articles, particularly for the gold and silver markets, on this subject matter.

The past couple of years have been a real test and challenge to my personal convictions and my skills based on the evidence and research I have done. One of the most difficult skills to accomplish in trading is the ability to break away from the herd. It's human nature, and most of us want somebody else to take the responsibility to deal with the challenges and find the solutions to our problems.

In a previous report I commented,

U.S. debt continues to increase. In the first two months of the current fiscal year that began on October 1st, the U.S. national debt has grown $320 billion. That is $21 billion more than the same two-month period last year, which illustrates that the growth of the national debt continues to accelerate. The reason of course is the federal government's huge operating deficit, which is not getting any smaller.

That is exactly what the general consensus seems to have adjusted to. Or, I should say, addicted to - the idea that our government is going to solve our problems and find the solutions through its distribution of wealth template - which has proven to be the formula to destroy the middle class and in doing so the old American Dream. I am not a gloom and doom person or an extremist. But I have been around the block enough times, and as a student of the market for more than 30 years I personally can tell you, I have never seen this set of circumstances come together as they are currently unfolding in the world financial markets.

The Cyprus situation is the canary in the coal mine. The fact is that this action has never been taken by any central bank previously - to essentially steal money from depositors - will have serious socio-economic consequences and sets the stage for the last act of this financial crisis. The collapse of the monetary system (U.S. dollar) as we know it, and the resumption of the long-term secular bull market in gold and silver.

On a recent phone interview, I asked Eric Sprott (Sprott Asset management) if the Cyprus crisis was the "Black Swan" of the eurozone? He said, "This is a Black Swan."

This is a template that is going to be applied on a global basis. The general consensus by the central bank leaders is to unleash the most aggressive monetary policies ever. Which is to print as much fiat currency necessary to band aid the system, with severe long-term inflationary if not hyperinflation consequences globally. .

There has never been a more profound reason to shift back to real money like gold and silver in order to weather the storm or the economic tsunami that's under way. The problem is that it may not be enough of the real thing to go around (Comex Gold Inventories Collapse By Largest Amount Ever On Record).

Over the last 90 days without any announcement, stocks of gold held at Comex warehouses plunged by the largest figure ever on record during a single quarter since record keeping began in 2001 (roughly the beginning of the bull market). See chart below.

Total drainage of physical inventories reached nearly 2 million ounces of gold, which at today's prices represent roughly $3,000,000,000.

Large speculators have the biggest short position on record. Interest by speculators in silver has waned in the past few months, as reflected by Commodity Futures Trading Commission data. In the March 26 weekly commitments of traders report, the most recent data, money managers' net-long position for silver sits at a mere 632 contracts for futures and options combined in the disaggregated report.

This is a dramatic fall from this year's high of 29,580 net-long contracts reached on February 5. Since reaching that high, the net long position for silver speculators fell each week. Meanwhile, the gross short position for speculators has risen to 22,382 as of March 26, from 2,922 as of February 5.

Extreme lows for the managed money net long positions are "usually associated with important bottoms for the price of Silver," said Karl Schott, a bullion specialist with EMA. I urgently recommend you to open your eyes and see that this is a life changing opportunity to accumulate gold and silver at current levels and buy as much as you can, converting fiat currency to old and real money like gold and silver in order to protect and maintain purchasing power. Don't wait, act now before it's too late. This is an explosive set of unusual circumstances for gold and silver markets.

Disclosure: I am long AGQ, SLV, AG, PSLV, GLD, GDX, SLW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.

Disclaimer: Trading derivatives, financial instruments and precious metals involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.