A Curious Pattern of Comex "Deliveries"

201
Mon, Aug 1, 2016 - 12:45pm

Even though gold "deliveries" on the Comex are nothing but a charade and shuffle of paper warehouse receipts and warrants, the latest trend is a real eye-opener and appears to be a rather interesting datapoint of extreme demand for gold in all its forms.

First of all, some background so that we're all on the same page...

Through the year, the Comex trades futures contracts for every month on the calendar. However, not all months are treated equally. Six of the months are treated as "delivery months" and these are the contracts which carry the majority of the short-term trading interest and volume. These months are February, April, June, August, October and December, The other six months are considered "non-delivery" and are very rarely traded or utilized as physical settlement contracts. These months are January, March, May, July, September and November.

A quick look at the current "gold board" reveals that, with the Aug16 contract now in its "delivery" phase, the active front month has become the Dec16. See below:

And, as you can see on the next chart, fully 3/4 of the entire Comex gold open interest can now be found in this front month, Dec16 contract:

OK? So, when a front month comes "off the board" as the Aug16 did last Thursday, it moves into its "delivery phase". This is when the entire charade and fraud of "Comex delivery" kicks in, usually characterized by a simple shuffling of paper warehouse receipts back and forth between the various Banks which operate the vaults. We've written about this on countless occasions over the past six years so we're not going to cover all of this again. Suffice it to say that there is very little, actual metal that is ever physically delivered on Comex. The entire process is simply in place to create the illusion of physical delivery in order to give The Bullion Bank Paper Derivative Pricing Scheme some element of legitimacy. That said, what is currently happening on Comex is a shocking trend that requires your attention and consideration.

Let's start by considering how a typical year of Comex deliveries has historically played out. Below is a chart of the delivery totals by month for Comex gold in 2015. Note that the blue bubbles draw attention to "delivery months" beginning with the Dec14 and the red bubbles denote the totals of the non-delivery months.

Do you see how this works? For all of 2015, the six delivery months produced a total gold delivery of 15,070 Comex gold contracts or, on average, about 2,500 per delivery month. Each contract represents 100 ounces of "gold" so the Comex can be said to have "delivered" 1,507,000 ounces of gold in these six months or a paltry 47 metric tonnes. For all of 2015, the six non-delivery months produced a total gold delivery of 1,148 contracts or about 200 per non-delivery month. This comes out to just 114,800 ounces of gold or almost 4 metric tonnes.

Adding this all together...For all of 2015, the Comex "delivered" 16,218 contracts of gold. This was 1,621,800 troy ounces of "gold" or about 51 metric tonnes.

(I don't know. Maybe I should stop here for a moment and let you consider whether, in the grand scheme of things, 51 metric tonnes is really much gold at all. The world produces about 3,000 metric tonnes per year so Comex "delivers" about 1.5% of total mine supply. And yet Comex/Globex electronic derivative trading is allowed to produce the price at which physical transactions take place around the globe. Neat trick, huh?)

Anyway, not to get sidetracked. Let's get back to the alleged Comex "deliveries" and have a look at the startling trend that we mentioned earlier...

Below is a chart of the total Comex gold deliveries thus far in 2016. Note that, as the year began, the amount of "gold" being shuffled around each month is not that dissimilar to 2015 or, frankly, any other year in the past. The non-delivery month of January kicked off the year with just 172 deliveries. Delivery February followed with 2,569. This was more than Feb15 but, all things considered, nothing significant or noteworthy. Non-delivery March saw just 743 and Delivery April had 3,984.

And now here's where things get funky...

Non-delivery May15: 26 Non-delivery May16: 2,215

Delivery Jun15: 2,959 Delivery Jun16: 15,785

Non-delivery Jul15: 728 Non-delivery Jul16: 6,987

Hmmmm. Does this seem a little unusual to you? Me, too. In fact, go back and check the total amount of Comex gold deliveries for ALL OF 2015. Do you recall the number? 16,218 contracts for 51 metric tonnes. This year, the month of June alone nearly exceeded that total at 15,785 and 49 metric tonnes! And the just-completed, non-delivery month of July had a total of 6,987 contracts for 21.73 metric tonnes of "gold". This is FIVE TIMES the delivered total for ALL of the 2015 non-delivery months COMBINED.

And the trend doesn't appear to be reversing in the just-begun delivery month of August. At contract "expiration" last Thursday, the CME reported that there were 14,402 Aug16 gold contracts still open and indicating a willingness to "stand for delivery" this month. As you can see above, delivery notices for 5,028 contracts have already been sent out so August appears set to challenge June's record for total Comex gold "deliveries" in one calendar month.

Quite an interesting trend, eh? This is all definitely something that we will monitor all month and through the remainder of the year.

BUT

At the end of the day, you should be asking yourself "why does this even matter?". As stated above, almost ALL Comex deliveries are nothing more than an exchange of warehouse receipts and warrants and very little physical metal ever changes hands. Therefore, to claim that some kind of "delivery failure" or "default" emanating from the Comex is forthcoming would be naive. The true importance of this information is in its significance as a DATAPOINT OF GLOBAL DEMAND FOR ALL FORMS OF GOLD. Consider:

  • The tonnage of gold flow around the globe...from West to East and from South to North.
  • The extreme and surging growth of "inventories" in the gold ETFs
  • Total open interest on Comex, which by July 11 had grown 73% from January 29
  • Global Mint and Central Bank demand, including China and Russia
  • Interest in owning mining shares has sent the HUI index up over 170% year-to-date

And now we have Comex allegedly "delivering" gold at a never-before-seen record pace.

We are truly in a brave new world my friend...off the map and into the region marked "beyond which be dragons". These historical anomalies in Comex "delivery" are just another datapoint that signals extreme, global demand for gold in all its current forms. Our hope here at TFMR is that, one day soon, the entire Bullion Bank Paper Derivative Pricing Scheme will finally collapse as delivery demands simply overwhelm the Bullion Banks' ability to supply physical gold on a just-in-time basis to an insatiably hungry investment world.

When will this day come? It's impossible to say with certainty given the deliberately opaque nature of the current system. However, the day WILL come and you had best prepare for that eventuality. Buy gold and TAKE PHYSICAL DELIVERY NOW before it's too late because, when the music stops and the paper games end, I can promise that you DO NOT want to one of the sad, uninformed few left holding nothing but a stack of meaningless paper certificates.

TF

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  201 Comments

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lakedweller2
Aug 2, 2016 - 4:42pm

@000Buck

Excellent comments. My impression is that folks would rather give Trillions from the Treasury to the banks to cover fraudulent mistakes and theft then spend considerably less for college and infrastructure than recognize the true benefits of Bernie's platform. Socialist scared them more than listening to what he said. Now we sit with two undesirable choices and a bunch of voters saying "oh shit ...now what".

I for one am pissed at what happened.

matt_
Aug 2, 2016 - 4:06pm

Re: Off Base

I may sell some stocks in the next couple of months to retire debt. but I'm not considering selling out completely until the HUI is around the old highs of 600 at least. I'm betting that the wheels don't completely come off the system, so I am going to hold out. There is significant risk in putting all your money in physical gold and silver as well. The main advantage of physical is that it is out of the banking system, but its nominal value can fall and it can be made illegal to buy/sell. Mining companies can be nationalized, hit with windfall profits taxes, and stock shares can be diluted or collapse with the rest of the market. Nothing is completely safe.

The problem I have currently is the huge tax bill I'll get from selling stocks. I no longer have any unrealized losses. Every stock I own is now up big.

bp9291Redley78
Aug 2, 2016 - 4:00pm

My take

Got to be gambling money for me, small percentage of the overall for the miners. You got it all right about the share price going down, and maybe the share price comes up quick, maybe not. But you have to be able to collect, brokerages can shut down, you have to settle and then get the money, markets can shut down(look at 1929), redemption gates, and the biggest of all is you get dollars back. I just think you can't get excited about the possibilities , maybe, maybe not. Remember this whole thing is about the death of the dollar.

OOOBuck
Aug 2, 2016 - 3:56pm

OK Mikey or whomever spouted this Communist stuff again

First off (my merry band of trickle downers), Bernie was never a COMMUNIST. (I mean really, whose butt do you pull this stuff out of anyway.) The Berlin wall has been down for more than 25 years!!

Bernie is not even a bonafide socialist. He is (and calls himself), a social democrat. If you're satisfied in not knowing the difference, Great!... I'll give you a penny for your car and all your light bulbs and gladly trade you for a horse and a bunch of candles.

Look, Bernie talks basic stuff and actually provides more detail as to how his platform could be paid than does the US military on how they can afford to run 10 carrier fleets around the world 24/7, 365/annum.

Let's just take one issue that seems to always to stick in the craw of some many of your ilk.

FREE COLLEGE.

I keep hearing it.... "why should I pay.... etc. etc. blah blah" Ok, here's one for starters. The rest of our competitors are doing it!!! It costs a fraction to nothing to complete a university degree in Germany, China, and more european countries than I want to bother to mention.

Just a bunch of socialists robbing and plundering future generations, you say?

Ya, like we've got it so much better here, dude. The US and europe are no longer alone in spearheading future innovation and the competition aren't doing it with graduates from their local highschools. We're bringing guns to what we think is a gunfight when it's a technology battle and we've left our brains in our other suit.

Redley78
Aug 2, 2016 - 3:48pm

Off Base

Thanks guys for the responses and confirming my suspicions. Since we are expecting the 'bubble of all bubbles' to take the market down this time eventually, i dont see very many of my miners pulling thru. Im up about 12k since May (thanks TF), but maybe ill just roll that over to my PM stack. Im a gambler by nature, so it will be hard to watch the market if it continues to explode, but at least ill know im not risking my families future on this ponzi scheme.

Still not selling, but the time is nigh...

murphy
Aug 2, 2016 - 3:40pm

@Redley

I believe after the crash of '29 everything went into the toilet. As others have said, then the miners came back with a vengeance. If you feel you are over leveraged and couldn't whether the time/storm until they came back you should lighten up on the miners. I'm guessing most of us old timers have cash, metal and fortitude to wait it out.

I think as dangerous as being in the miners if/when we have a crash, is not being in them. If the markets crash and burn they will undoubtedly close probably for a week or more. Not unlike after 911.

If you don't own the miners before that, how much higher do you think they will be when they re-open?

OOOBuck
Aug 2, 2016 - 3:29pm

Libero - it's Endeavour, eh

Canadian spelling or whatever. Still, the one you want is EXK.

Incidentally, I'm back home as of the last hour and have a few words that I'll be sharing with Mikey and a few others. Just gotta unpack.

Clarkii Stomias
Aug 2, 2016 - 3:05pm

@Redley78 - Yes, miners will initially fall with the markets

They are equities too. 

Here's the general assumption/guess: There will be a market crash and miners will go down with it. Then the markets will be closed for a time (Weeks? Months? Half a year?). This is when your 90% silver stack would be most useful. And should true armageddon ensue, the rest of your phys stack will hopefully preserve the core of your wealth (along with your stack of lead). Then, depending on what form they take, when the markets again reopen the global markets and currencies would need to be rebuilt with gold composing some key part of the asset backing and with PM prices reset factors higher from where they stand today. At that time, whatever miners of yours still survived will be multiples and multiples higher.

But don't think you are saying something many Turdites haven't thought about. The potential for even the miners to turn to dust (had to) is very much in the consideration, that is why a lot around here refer to any money invested in the markets as gambling money. If a mining equitiy you are invested in survives, good on you. The probability that miners initially crater with the rest of the market during the big one, however, is next to guaranteed.

And as you said, because they are indeed equities, even on a good day for the PMs like today a falling S&P still weighs on the miners.

infometron
Aug 2, 2016 - 3:01pm

Re: Off Base

Ordinarily this would be a big day for JNUG, but the gains are very modest, less than many of my miners, especially SMD, SPA, DV, and quite a few others. Seems to me like a combination of three possible reasons: 1) As already noted, big money bails to cover margin calls elsewhere, or just because everything is going south; 2) Also, as already noted, people in the know are worried Credit Suisse might not be good for it; and 3) good ol' fashioned profit taking.

The fact that some junior miners and explorers are way up today is a good sign.

Libero
Aug 2, 2016 - 2:49pm

Endeavor Mining not to be confused with Endeavor Silver

EDVMF Endeavor Mining =BAD EXK Endeavor Silver =GOOD

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