November Delivery; A Comex Odyssey
By now, we all know that the process of Comex metal delivery is shady and deliberately opaque. What has transpired these past few weeks only strengthens this belief.
I've written several times in the past about the perfect and precise additions to, and subtractions from, the JPM eligible gold vault. The most recent post included all of the past links and can be found here: http://www.tfmetalsreport.com/blog/6272/information-deemed-be-reliable
However, that's not what I'm writing about today. Instead, I want to focus upon the Comex gold vaults and apparent surge/rush for immediately deliverable gold.
Remember how this works...There are six months per year that are considered "delivery" months for Comex gold. Though an entity may stand for delivery of any contract, the vast majority of the deliveries are made in February, April, June, August, October (to a lesser extent) and December (typically the busiest delivery month of the year). You can see this on the chart below:
However, it is possible to stand for delivery during the "non-delivery" months of January, March, May, July, September and November. Not many folks do, however, and this, too, you can see in the chart above.
In order to stand for delivery in any month, one must provide 100% margin by First Notice Day and indicate your desire to take delivery of your gold. Additionally, and this is very important, the contract continues to trade through the delivery month and anyone willing or needing to "jump the queue" can appear on any day, provide the full margin, buy a contract and then stand for almost immediate delivery. This is where our story gets interesting as this is precisely what happened about 10 days ago.
As you can see below, through the first 12 days of this "non-delivery" month, physical deliveries were almost non-existent. Only 10 deliveries had been made for a total of 1,000 ounces and total remaining open interest was just 33 contracts. No big deal, right? Everyone must simply be waiting for December...
WRONG! Check the red rectangle on that chart! On the 13th and the 14th, someone or something suddenly appeared as a hurried buyer of physical gold. Open interest in the November contract surged and 1,382 deliveries were almost immediately made. Let's do the math on this, shall we?
1,382 contracts X 100 ounces/contract = 138,200 ounces of gold
138,200 ounces of gold is 4.3 metric tonnes.
At $1180/ounce, that's $163,076,000.
So, putting this back together...Out of the blue and suddenly, on November the 13th and 14th, someone or something appeared with just over $163MM and took immediate delivery of 4.3 metric tonnes of Comex gold, not wanting to wait for the December delivery month.
Now, why in the world would somebody do that? Perhaps a bullion bank is in immediate need of metal? Hmmm. The GOFO rates which have been negative now for four weeks would certainly suggest physical tightness. But maybe it's not a bank. Maybe it's an individual or fund instead? But why not wait for December? Why the rush to jump the queue and get your gold in November?
For some clues, let's dig a little deeper...
Check the chart below:
Longtime readers will recall that, last December, the JPM House (proprietary) account was extremely active, stopping 6,254 contracts or about 96% of all deliveries. JPM House continued issuing and stopping contracts through the spring but, strangely, their activity has ground to a complete halt over the past six months. Last week on Capitol Hill, JPM claimed to be exiting the physical commodity business and we know that they sold the building which houses their gold vault late last year. Maybe they are?!? Who knows?
Regardless, what are we to make of the 1,305 contracts that JPM suddenly delivered this month from their "customer" account? And note that all of it apparently went to the House Account of The Scoshe. (see chart above)
So, based upon the available evidence, The Scoshe showed up two weeks ago, plunked down a cool $163MM and took immediate delivery of 4.3 mts of gold. This is interesting in and of itself but, remember, we are dealing with the deliberately opaque Comex so the mystery is about to deepen even further. How? Why?
Check these two charts. These are the CME "Gold Stocks" reports from Thursday, November 6 and last Friday, November 21. (Keeping in mind, of course, the CME disclaimer at the bottom of each report.)
So let me see if I've got this straight...
- On Nov 6, JPM shows 176,436.330 ounces of registered gold and 417,475.738 ounces of eligible gold. This gives them a total of 594,012.068 in their entire Comex vault.
- On Nov 13 and 14, JPM "delivers" 138,000 ounces of gold to a willing buyer so eager to receive metal that they jump the queue, put up $163MM in margin and take immediate November delivery.
- On November 21, JPM shows 176,436.330 ounces of registered gold and 417,475.738 ounces of eligible gold. This gives them a total of 594,012.068 in their entire Comex vault.
- And look at The Scoshe, which had allegedly taken delivery of 132,000 ounces of this "gold". Over the same time period, their registered gold has not changed at all and their eligible gold has actually declined by 72,000 ounces.
System/Cartel Apologists will just claim that this is how it all works...that this is a logistical issue and that these are warehouse receipts that simply allow each bank to hold other banks' gold. Rrriiiggghhhttt. So, you're telling me that someone or something ponied up 163 mil simply for the pleasure of knowing that they now have a paper claim on a JPM customer's gold within the JPM vault? Okeydokey then. Knock yourself out. I guess we'll see...
Instead, maybe this sudden desire for 4+ mts of gold really is another sign of extreme delivery tightness? Maybe the CME (with their disclaimer fully visible) is actively under-reporting vault movements so as to hide the severity of the situation? Maybe someone or something jumped the queue because they were concerned that, if they waited for December, there wouldn't be much gold left? And maybe, just maybe, we're all set up for a rollercoaster ride in December where indications point to a minimum of 10,000 or more contracts standing for delivery?
The Dec14 Comex gold contract expires on Wednesday and it trades First Notice on Friday. As of last Friday, there were still 149,255 contracts open of a total OI of 468,748. That's 31.84%. Last year, with the same amount of time remaining before expiration, the Dec13 OI was 104,270 versus a total of 402,194. That's 25.92%. Last December, 10,157 stood on First Notice Day. (In the end, however, just 6,493 deliveries were made as 3,664 contracts were simply sold for cash.) Given the current OI numbers listed above there's every reason to think that 12,000-13,000 will stand this week, at a minimum. If all of these holders demand delivery and don't simply close via trading over the course of the month, that's 1,300,000 ounces of gold. Look closely again at the Gold Stocks numbers above. The total Comex registered Vault is just 869,309 ounces.
Look, I'm NOT trying to say that Comex default is imminent. I'd be stunned and flabbergasted if it happened. However:
- I have no doubt that readily-deliverable, physical gold is in short supply in both London and New York
- The Comex, The Bullion Banks and CME actively attempt to deceive market participants by inflating or simply fabricating their vault and delivery numbers
Therefore, your only winning move is to take immediate, physical delivery of your gold holdings. Do not, under any circumstances, hold your metal in unallocated, paper form. You do not have clear provenance and, when this entire fractional reserve bullion banking scam finally collapses, it will be YOU left holding the bag.
Continue to prepare accordingly as we await the inevitable,