Comex Bleeds To Death … Fast

Strange things are happening at the Comex. Once a powerhouse for gold and silver, now only a shadow of existence. The gold vaults are running empty for a while with a major bang yesterday. Even silver is fleeing Comex vaults like a rabbit from a bear.

Lege kluis

In 2008 Comex stored more than 5 million ounces gold in its Registered Gold inventories. But the trend has been lower for years with a cliff-like decline at the beginning of 2013 when gold crashed $500 in a few weeks.

Comex Registered Gold inventory

Comex goud

But yesterday Registered Gold inventories crashed again … 73% in one day! A stunning 201,345 ounces (73%) of the total 275,325 ounces of Registered Gold was transferred to the Eligible Category by 3 banks.

Comex goudvoorraad

There is only 73,980 ounces Registered Gold inventories left, the lowest level in more than 20 years. This accounts for 2,3 tons of gold, something the Chinese eat for breakfast. This has to be one of the most surprising movements of Comex Registered Gold inventories ever.

Comex default at hand?

Thus when the registered number of ounces dropped overnight from 275,325 ounces down to 73,980 ounces, it suddenly made the number of paper claims against each ounce of gold now a stunning  542 to 1.

The 40 million ounces of gold open interest and the record low 73,980 ounces of registered gold imply that a whopping 542 ounces in potential paper claims to every ounces of physical gold. Call it a 0.18% dilution factor.

Comex Gold Cover Ratio

Goudvoorraad papier vs fysiek

The two biggest fears for the paper based U.S. gold markets are now:

  • for someone or something to demand delivery of their open gold contracts
  • for China to suddenly declare a new physical gold price at their Shanghai Gold Exchange (SGE) market

As a reminder:

The Registered category represents the total amount of vaulted gold that is supposedly stored for use in the Comex, and which was purchased from duly registered producers.

The Eligible category, that of registered gold, represents the actual number of physical ounces deemed available for purchase and delivery to customers.

Where the gold shines, silver follows

The total Comex Silver stocks also declined significantly over the past 6 months, from a peak of 184 million ounces in July to 156 million ounces presently.

The majority of the declines came from the Registered inventories. Registered Silver inventories declines from 60 million ounces in July, to 36 million ounces now. In 2007 Registered Silver inventories stacked 70% of the total, now only 20%.

Comex Registered Silver inventory

Comex zilver

On the other hand, the Shanghai Futures Exchange Silver inventories continue to grow and are now 790 metric tons, more than 30% up from 600 metric tons at the beginning of the year.

So it seems that this huge decline of Registered Inventories suggests that the end of the Comex Exchange as a price setting mechanism is now closer at hand than ever before.

Disclosure: None.

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