09 September 2015

Comex Registered Gold to Open Interest at New All Time High 207:1

The ratio of open interest to registered gold is at an all time high of 207:1 potential claims per ounce.

Since this is not an active month for gold it is not pressing.

However, the amount of registered (deliverable) gold at these prices has fallen to at least a twelve year low and perhaps more.

Of late the Comex has fallen away from physical delivery in gold, with most of the bullion in the warehouses being held in storage.

More concerning is the overall tightness of the gold market, particularly in the LBMA which serves as a major wholesale physical bullion distribution hub for the world.

Speaking of London, I came acress a brochure from JP Morgan's new London based service for taking unallocated and ETF gold and applying it as collateral in tri-party arrangements around the world.  Leveraging up the assets you might say, adding a bit of income performance to the old portfolio.  Counterparty risk as well I would imagine.

It was a very slick brochure for the high end portfolio managers with excess bullion just laying around gathering dust that might be put to work as they say.

What was particularly interesting is the way in which they describe the gold market in 2011.  Does this sound like the familiar refrain from the financiers and their talking heads?

Here is a brief excerpt.

Gold has many characteristics that make it appealing as collateral. It is liquid, high quality, and traded and priced globally. As counterparties seek to diversify their collateral pools and stringently review their collateral options, gold takes its place amidst other high grade collateral such as government securities and cash.

Gold has the added attraction for collateral takers of being 'right way collateral,' which means that in times of crisis, its price is generally expected to rise, thus providing added protection and diversification to traditional forms of non-cash collateral such as fixed income or equities.

According to John Rivett, global business executive for collateral management, 'It would be difficult to find a more stable and secure asset than gold. Gold shines when there’s a flight to quality: it runs counter to the market in valuation whenever there’s a credit crunch or fear of contagion.'

J. P. Morgan, Golden Opportunities, 2011