Surging COMEX Silver Deliveries - Craig Hemke (29/05/2018)

by: Sprott Money
Summary

The month of May is a "delivery month" for COMEX silver, and the total amount of "deliveries" has reached a level not seen since 2007.

The absolute amount of "deliveries" on the COMEX has increased over time.

May18 marks the sixth, consecutive "delivery month" where the total amount of contracts "delivered" well exceeded the amount of contracts still open and apparently "standing for delivery" when the contract.

We've written about the COMEX silver "delivery" process multiple times in the past. However, with "deliveries" for the May 18 contract surging to totals not seen since 2007, we thought it might be time to write about this again.

First, a disclaimer:

This is NOT meant as some sort of "the COMEX is about to default" hyperbole. Instead, this post is intended simply as a look at the absolute numbers in an attempt to discern any trend worth noting.

And we might start by referring you to the two articles we've published on this topic:

• This from March of 2017 gives important background on the questionable "delivery" process

• This from October of 2017 details the surge in total "deliveries" that began last year

OK, so what do you need to know at present and what prompts this latest update?

The month of May is a "delivery month" for COMEX silver, and the total amount of "deliveries" has reached a level not seen since 2007. As you can see below, the total amount of "deliveries" for May has reached 7,157 contracts. This is the highest one-month total since December of 2007, and it represents a total "delivery" of nearly 36,000,000 ounces of "silver". (Thanks to Nick Laird at GoldChartsRUs!)

The chart above shows the gradual trend toward greater "deliveries" over the past several years, and this is, in fact, the case. As you can see below, as COMEX silver open interest has grown over the past four years, so has the total amount of “ deliveries".

Since December of last year, the trend of increasing "deliveries" has continued.

Clearly, the absolute amount of "deliveries" on the COMEX has increased over time, but so have total open interest and the total amount of silver allegedly held in the COMEX vaults.

What is most noteworthy, however, is that May18 marks the sixth, consecutive "delivery month" where the total amount of contracts "delivered" well exceeded the amount of contracts still open and apparently "standing for delivery" when the contract went off the board.

Thus, the questions that must be asked are these:

1. Why has this pattern repeated for six, consecutive delivery periods?

2. Why this surge in just-in-time demand for silver delivery?

3. Does this tell us anything about the absolute level of global demand for silver?

4. Frankly, does this even mean anything at all given that the COMEX "delivery" process has, in the past, been shown to be nothing more than a circular process where Banks take turns issuing and stopping contracts?

In the end, we'll continue to closely monitor these numbers in the months ahead. With the dollar price of silver near the all-in cost of production and with demand for industrial metals and commodities increasing, perhaps these COMEX silver "deliveries" are acting as the proverbial canary in the coal mine for COMEX market stress?

Time will tell, and we'll wait to see if these trends continue in July and through the rest of 2018.

Original Post

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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