The Golden Truth: Update on December Comex Gold Open Interest: This Could Be Interesting

Friday, November 27, 2009

Update on December Comex Gold Open Interest: This Could Be Interesting

December open interest is 44,366 contracts. This represents 4.4 million ounces vs. the 2 million "eligible" -available for delivery - ounces of gold in today's Comex inventory report. Anyone holding a long position had to be ready for a delivery notice on Monday, meaning their futures account has to be fully funded and ready to pay for delivery as of Monday. It remains to be seen how this will play out over the month of the December. Technically, last "notice to deliver/delivery" day is 12/31. I have yet to understand how the delivery notices are assigned (i.e. notices can be assigned anytime from Monday to 12/31), and unassigned contracts can be sold up to 12/30 or tender for cash, but if every single one of those 44,366 contracts has the intent of taking physical delivery, the Comex has a problem.

9 comments:

EconomicDisconnectFriday, 27 November, 2009
Dave,
not trying to box you in, but what % do you imagine will take delivery?

Obviously anything over 50% is going to be a problem. I can imagine a secenario where banks will pressure any clints they have pull over to roll the contracts so their shorts do not go boom.
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EdwardoFriday, 27 November, 2009
And if Comex has a problem, so too do all those folks who want to take delivery. I'm glad I'm not one of them.
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AnonymousFriday, 27 November, 2009
Dave,

Could you address http://www.cmegroup.com/tools-information/lookups/advisories/market-regulation/SER-4942.html and the Comex's acceptance "gold-backed exchange-traded Funds ("ETF") shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts."

Is it correct that exchange-for-physical is not the same thing as physical delivery, and delivery means delivery of metal, not etf shares?
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Dave in DenverFriday, 27 November, 2009
@anonymous - Man, ever since that horrifying judgement by the Comex was issued, I've been kind of pretending that it's not really there.

My best guess is that since, at least with GLD and I'm not sure how IAU works, it is possible to redeem GLD shares for gold from the GLD trust - provided the redeemer holds 100,000 share lots - that the Comex considers GLD as a physical equivalent and therefore qualifies as an EFP transaction.

I'm not aware that shares of IAU or GLD have been used to settle a gold contract yet, but that doesn't mean it hasn't occurred. Having said that, my fund has not engaged in acquiring physical gold or silver from the Comex since that ruling was issued because when we buy, we want to buy actual physical that can be physically delivered to our depository.

The ruling really underscores the view out there that the Comex does not physically possess all of the gold that it reports in its warehouses on daily basis and that it is getting nervous about a "run on the bank."

I would bet that the instant the word were to leak out that GLD or IAU were actually used to settle contracts, the price of gold will parabolic, because everyone pretty much understands the implications of that. Imagine you are a large jeweler with several contracts open and you are expecting delivery of several 100 oz. gold bars, and you are notified that instead the Comex needs to know where to send your GLD certificates. That situation could become very litigious very quickly.

What are your thoughts on that, if you don't mind?
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Dave in DenverFriday, 27 November, 2009
@Edwardo: LOL - agree

@gyc: This is one of those times when I wish that I had been tracking the amount of open contracts that historically take delivery. I would put myself in a box if I thought that I could give an answer that had even a 50% chance of being in the ballpark.

The two biggest roadblocks to verifying how many actually take delivery is that fact that in the past, in months where there's been a fair amount of open contracts holding for delivery, it seems like there are never any drawdowns in the gold inventory. This happened last June. It was astonishing. Either all the open contracts tendered for cash (accepted cash in lieu of gold) or the Comex is playing games with their inventory. I would bet much better than even money that the latter is the case.

Also, I recall that, this past spring, it was alleged that the ECB system bailed out a Deutsche Bank short on the Comex with 800,000 ozs. That allegation was never proved but there are enough people writing and talking about it that is likely it did occur.

I guess the best barometer will be to watch the price of gold in December, especially in relation how the SPX and dollar move.

One conclusion I am coming around to after over 8 years of this is that the war going on behind the scenes to manipulate gold and hide the truth about what is really going on runs far deeper and with far greater cunning than any of us can possibly understand or perceive unless we were part of the "inside" scene. I believe that gold is much more important to Central Banks, Governments and the wealthy elite than any of us can possibly comprehend.
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EdwardoFriday, 27 November, 2009
Dave wrote:

"I believe that gold is much more important to Central Banks, Governments and the wealthy elite than any of us can possibly comprehend."

I agree, and I also agree with your idea that there is massive jockeying going on behind the scenes amongst very powerful players.
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AnonymousFriday, 27 November, 2009
So what's the position in silver as December is the silver delivery month traditionally?
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EconomicDisconnectFriday, 27 November, 2009
"I believe that gold is much more important to Central Banks, Governments and the wealthy elite than any of us can possibly comprehend."

Well said, and very true. Maybe some will wake up, but I doubt it.
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AnonymousMonday, 30 November, 2009
"the war going on behind the scenes to manipulate gold and hide the truth about what is really going on runs far deeper and with far greater cunning than any of us can possibly understand" - agreed like everything else unless you are inside you dont really know sounds easy from outside.

however, this 44,000 number which is double the number of available in COMEX, shows that the middle tier - hedge funds etc.... which are coming of late in the game are trying to grab whatever they can get their hands on before it blows that there is none available...it is not easy to get it, of course not, but think about it if they are not able to get it, next year sometimes they will be left with a piece of paper and get in line "to get delivery"...no wonder its not easy - of course not! otherwise gold should sell for tens of thousands of dollars, at this price its like you are stealing it from them and they know it.
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.