Showing posts with label registered and eligible. Show all posts
Showing posts with label registered and eligible. Show all posts

26 January 2016

Gold Registered for Delivery at the CME Warehouses Plunges To a New Low


Over 200,000 ounces of gold bullion were withdrawn from the registered (deliverable) category in the Comex licensed warehouses at the least.

That takes the new total down to a little under 74,000 ounces of actual physical bullion registered for delivery at these prices.  I will check later but I do believe this is a new low for this century.

Since January is pretty much a non-delivery month for an increasingly non-delivering exchange, it may not mean all that much, but it is interesting to watch for all the reasons we have discussed previously.

And it is a fairly recent phenomenon with no other good explanation that those holding their gold at CME licensed warehouse do not with to hold their gold in a deliverable category at these prices.

Or they enjoy doing useless and pointless paperwork, as some would have you believe.

One should keep an open mind about things.  But some reasonably persuasive data to back up the theories from the perennial apologists for the bullion banks would be more persuasive.

When something has not happened before, and other evidence suggests that something has radically changed, I do not think that it is wise to just dismiss it.

This should send the 'potential claims per ounce' back towards those highs from the end of last year.

My own theory as you know is that traders who are holding gold in these warehouses do not wish to take the risk of losing it in a physical short squeeze, or have otherwise encumbered the gold and do not wish to risk a delivery and loss of the physical bullion.

There could be another reason for this.  I have surely not heard anything remotely plausible yet, just the usual tortured rationales from the perennial bullion bank apologists and creatures of a failing bullion hypothecation system.





11 September 2015

Hitting the Wall - Record Low 'Deliverable' Gold At the NY Comex - Unusual Tightness of Supply In London


“The City itself lives on its own myth. Instead of waking up and silently existing, the city people prefer a stubborn and fabricated dream; they do not care to be a part of the night, or to be merely of the world. They have constructed a world outside the world, against the world, a world of mechanical fictions which contemn nature and seek only to use it up, thus preventing it from renewing itself and man.”

Thomas Merton, Raids On The Unspeakable

Here are the current numbers and some recent history on the registered (deliverable) gold bullion inventories held at all of the Comex warehouses in the US.  One must view these number within the context of the greater world market for precious metals.

There is much more gold that is privately held in storage in these warehouses that is of an eligible form to be sold if the owner should choose to do so.

Last month JPM was notable for choosing to sell bullion at current prices in large numbers.  So I would imagine that as we move into active delivery months that JPM may be worth watching.

It is correct to say that very few contracts for gold bullion in NY actually result in anything more than a speculative trade,  some wager.   The last I heard only a very small number of contracts, on the order of a few percent, resulted in 'delivery.'

The current total of all registered gold is 182,611 troy ounces, or roughly 5.68 metric tonnes.

There are a total of almost 8 million ounces of eligible gold in all the US Comex Warehouses.  I have included that chart at the end.   So some will say, 'see, there is more than sufficient gold in the warehouses.  This is all nonsense.'

And to that we may respond, yes, but at what price?  That gold is presumably private property and not for sale at these prices, except for 182,611 ounces of it.

Anyone who discusses the dynamics of supply and demand in a purportedly 'free market' without even a nodding consideration to the notion of price as a factor is making no sense.

Why show you all this?    Some say it means nothing, that I do not understand the markets.  Well, perhaps that is true.  Then what harm is there in allowing people to see what has happened for themselves.

As you may recall, Goldman was seen taking a large delivery of gold for their house accounts in August.  And the amount of gold posted at the Comex 'for sale' at these prices is at historic lows.  How can one not wonder at this?

I am certainly not suggesting that there will be hard default at the Comex.  How could one expect that in a relatively small market that almost always settles in cash and is dominated by a few, very large insiders who are actively working both sides of the trade?    No, if there is a default anywhere, it will precipitate in a physical marketplace where bullion changes hands and form, more likely in London, perhaps even Switzerland.  And then it will cascade to all the other markets quickly.

The portion of the gold in London that is not specifically 'spoken for' and held closely is considered to potentially be part of 'the float.'

There have been recent observations by people such as Peter Hambro that it is becoming almost impossible to obtain physical bullion in London at these prices, only endless promises.  Even the financial media seems to have realized that there is a tightness in the physical supply of gold.

And yet, with all this the price discovery seems to go on as usual undaunted, divergent from the underlying physical supply issues, except for an increasing leverage of claims to ounces, and backwardation in pricing so that a premium must be paid for actual physical delivery.

This is a very dangerously developing situation, the kind that leads to market dislocations.

There are new calls for the increased 'monetization' of gold, by hypothecating existing bullion to satisfy third party collateral shortfalls.  This is a weak form of purchase, a 'rental' that promises to replace what has been further sold, perhaps in  multiples, with the product itself being refined into a different format and purity, and then shipped overseas.

And the supply of readily available gold seems to be quietly withdrawing from the markets.










06 September 2015

Comex Registered Gold Inventories - 'Deliverable Gold' At Current Prices


As someone asked, since hardly anyone is buying gold on the Comex and taking it out, why would be concerned about any inventory levels of deliverable gold?

Indeed, why be concerned about price if it is just all a part of an extended game of liar's poker between speculative interests?

It is almost just a betting parlor now, hence the title The Bucket Shop.

However, that does call into question its role in price discovery in the global trade around the world, much if not most of which is physical.

And that price discovery in London at the LBMA is asserted almost every day in one of the clearest patterns of price manipulation that one might even try to imagine.

As I have said on a number of occasions, I am not looking for a 'default' in NY.   How can one default when forced settlements in cash can be easily accomodated at the Fed's window at any time?

No, the first cracks in the facade of the modern Gold Pool will appear in a key node of the physical market, most likely in London or Switzerland as fails to deliver.  Perhaps even in Shanghai.

However, like the ebbing of the tide, a ready supply of gold for delivery will likely start disappearing from the shelves around the world at both the wholesale and retail level as the vortex of actual delivery in Asia consumes the ready supply at current prices.  The cost of 'borrowing' gold will increase dramatically as the risk of a counterparty failure to return the bullion will intensify.

There will be a divergence between the price for immediate delivery of bullion and the paper price in the future, until the discrepancy becomes so obvious that there is a 'run' on the available short term physical supply, and real gold bullion goes to 'none offered' at any price close to the 'price discovery' of the paper markets.  And then there will be a halt, a settling, and a reset.

If the source where you hold your bullion does not offer a guarantee of the bullion itself, rather than the 'value of the bullion' then chances are unacceptably high that you will be force settled in cash prior to a reset of the price substantially higher.

This is what happened in the US in 1933 when the official gold currency in circulation was recalled.   People who had gold stored in the Banks had their monetary gold taken,  a paper payment was received for it at the official price, and then afterwards the price of bullion in US dollars was set 41% higher.  The increase in reserves was used to help prop up the insolvent banking sector.

Although such an action today is less likely since gold is no longer a monetary metal with a claim from the state, nevertheless such an action in a force majeure breakdown in the financial system whereby borrowed and 'shared' gold could not be returned at the current price faces a similar fate.  This is how the failure of MF Global was recently resolved, and I can easily see the same rules applying for a market break in any leveraged system of ownership.

Related:  Why the Federal Government Seized Gold In 1933








12 December 2013

Delivery Day: Why a Comex Default Is Unlikely as a 'First Mover' Event


"The very hirelings of the press, whose trade it is to buoy up the spirits of the people. have uttered falsehoods so long, they have played off so many tricks, that their budget seems, at last, to be quite empty."

William Cobbett

A couple of people pointed me in the direction of this CME rulebook when I asked for some details about how there can be so many deliveries in a highly active month like December, but so little outgoing activity can be shown in the warehouse inventories.  And several more offered their own information, and I thank them for it.

Here is a link to the CME Rulebook On Deliveries

Another fellow was kind enough to send a couple of the most pertinent passages my way. They are included below. 

As you can see, a 'delivery' can be made, and most likely is most often made, by the transfer of a Warrant for the metal. The Warrants are issued and backed solely by the licensed facility, ie the specific warehouse controlled by JPM, HSBC, etc.

The Warrants have no expiration, so one might assume that they become traded around like currency, for those in the business of not actually taking physical delivery and moving their bullion out of the warehouse complex.

And I would not assume that even a licensed operator like JPM would move their house account bullion out of another operator's warehouse to save on storage costs,  because they typically are not engaging in long term holdings that would make it worthwhile. 

I don't think it becomes too hard to see how this structure, which to my knowledge is not audited, can become quite the twisted paper chase of counterparty risk and rehypothecation, given the general practices of the Banks in some many other areas.

As an aside, I do not necessarily believe that JPM's stopping the vast majority of the gold deliveries for their 'house account' is a bullish sign, not at all.   But it should at least raise some eyebrows that a 'market maker' is buying bullion so heavily for its own account.  Is this to underpin short side obligations in some other markets?   Only the bookkeepers know for sure. 


By taking these warrants and the underlying bullion for their own account, they may even be controlling its disposition of the bullion, eg. making sure it remains within the Comex licensed facility complex and is not taken out and melted into bars for use on other exchanges in Asia.   The Comex inventory is rather thin after all.

By the way, we do know that an operator is taking delivery for their house account, versus a customer, because there is a CME report that explicitly shows this.  I was surprised at this level of detail.

To sum this up, I am now even more persuaded that if there is any default or sudden deleveraging in the gold market it is unlikely that the Comex will precipitate this event. It is more likely that some incident in another market more physically based would trigger deleveraging, which would thereafter cascade throughout the paper gold market in London and New York.

Since we know rehypothecation is taking place as a customary business practice, with the only question being the extent of it, and with operators acting as their own regulators in terms of inventory, with even the exchange explicitly taking no liability for their data, I think it is very possible for an incident in the gold market to occur. 


The probability of this cannot be determined for the usual reasons, in that it is not possible to gauge the actual amount of counterparty risk because of the opaque nature of the information and the market.  It could be discovered, but that would require a third party audit.

But there is rehypothecation, and there is counterparty risk. And it appears to be a bit stretched by historical standards. And this post is certainly no defense of the Comex. If anything its connection to the broad global market for physical bullion is more tenuous than I had even thought previously, more like a shell game than a market that brings together producers and consumers. That it is a price setting mechanism for a much larger and broader physical market that plays a key role in the allocation of resources is almost unbelievable.

Some cavalierly point to 10:1 leverage as acceptable, as being customary for Banks holding around ten percent reserves (in another better day before sweeps etc., but that is no matter).

It begs the question that liquidity in the currency markets is significantly greater and more flexible than in the physical bullion market, a fact that so many modern economists often gleefully celebrate.

The Fed can expand its Balance Sheet to kingdom come, but they cannot produce a single ounce of actual gold bullion in that process. And that is why gold is such an emotional topic, so feared and derided in turn, because it resists the forces of fiat money and the human will by its mere stubborn existence.

706.E. Delivery Day
The day on which the long clearing member receives the Warrant for the metal shall be referred to as "Delivery Day." Delivery may take place on any business day beginning on the first business day of the delivery month or any subsequent business day of the delivery month, but no later than the last business day of the current delivery month

705B-5. A Warrant shall be of unlimited duration and remain valid until cancelled by the Licensed
Facility that issued it.

705B-6. Licensed Facility shall be solely responsible for insuring that no duplicate Warrants are
issued, printed or released by it.

Chapter 113
113102.E. Termination of Trading
No trades in Gold futures deliverable in the current month shall be made after the third last business day of that month. Any contracts remaining open after the last trade date must be either:
(A) Settled by delivery which shall take place on any business day beginning on the first business day of the delivery month or any subsequent business day of the delivery month, but no later than the last business day of the delivery month.
(B) Liquidated by means of a bona fide Exchange for Related Position (“EFRP”) pursuant to Rule 538. An EFRP is permitted in an expired futures contract until 12:00 p.m. on the business day following termination of trading in the expired futures contract. An EFRP which establishes a futures position for either the buyer or the seller in an expired futures contract shall not be permitted...

CME Group Rule Book Chapter 7:
703A-5. "Eligible" shall mean, with respect to any metal, that such metal is acceptable for delivery against the applicable metal futures contract for which a Warrant has not been issued.

538. EXCHANGE FOR RELATED POSITIONS
538.B. Related Positions
The related position (cash, OTC swap, OTC option, or other OTC derivative) must involve the commodity underlying the Exchange contract, or must be a derivative, by-product, or related product of such commodity that has a reasonable degree of price correlation to the commodity underlying the Exchange contract.

It appears that an ETF can be used to settle a Comex futures contract, noting that this is a negotiated settlement and not forced upon the receiving party. There could be subsequent rule changes to this one, but it really doesn't matter much since I am fairly sure they can settle in cash if both parties agree.

30 November 2013

Comex Registered Gold Inventory Levels - 65 Potential Claims Per Ounce


"A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules."

Jorge Mario Bergoglio, Francis I

Here are the latest inventory figures of registered (deliverable) gold in Comex approved warehouses.

I am not sure approved can really apply, given the distancing that the Comex recently instituted in the disclaimer on their inventory report.
"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only."
Perhaps we should start saying recognized, or acknowledged. Comex takes the quantity and quality and availability of gold bullion in these warehouses at 'face value' based on unaudited reports from the vault managers and releases the data 'for information purposes only.'

I will never forget the instance where Harvey Organ and son paid a visit to the Scotia Bank vault, and found so little actual bullion on the premises.  Here is their audio interview from 2010.

The Scotia reports show that the backing for their gold and silver certificates had fallen to 43% at fiscal year end of 2009.   This situation was corrected after being reported to officials. 

While some cavalierly dismiss this incident, saying that Harvey and son 'should have known,' in fact the point was that this was a surprise to many, and it was corrected only through an accidental encounter of a customer with the reality of what the Bank had been doing. 

Sometimes these accidents occurred during periods of stress, as in the case of MFGlobal.   It has to do with the discrepancy between supply and apparent supply.

As a quick word, although some like to refer to the chart below as 'owners per ounce,' I think it is important to remember that the Comex is not really a physical market, and so only a small minority of contracts actually become presented for delivery.

However, the 'potential claims per ounce' of deliverable is a useful metric, especially at the extremes, in much the same way that 'days to cover' is a useful metric for short interest in stocks, keeping in mind the presumption in that figure that the price can rise without restraint.   No one expects all the shorts having to cover at the same time, but the metric is a useful measure of short interest nonetheless. 

And so it is with potential claims per ounce, although in this case we are looking at what is considered deliverable, rather than every ounce of bullion that could potentially exist in the world for what I would think are obvious reasons.

Why don't I just look at the eligible?  Well I do, but one must keep in mind that just because bullion is called eligible does not indicate that it is for sale, not at all.   It is just bullion being stored in a particular form in a particular vault. It is the registered or deliverable bullion that is available at the current price levels, which is really the point after all, isn't it?

And for those who watch the Comex for default, eligible does not work all that well, because in the case of a run on bullion, I would imagine those who have bullion in storage in one of the those acknowledged warehouses would pull their own stock out fairly quickly, as they might be permitted.

As you know, and as I must remind you, Comex could suffer a break in confidence, a de facto default, but an actual default is not likely because of the exchange's ability and possible willingness to invoke force majeure and dictate a settlement in paper money.

If some incident should provoke owners and investors to wish to take possession of their bullion, one must consider what the implications might be.   How long will they have to wait to receive their property, if it will be returned at all, or in kind at some dictated settlement price?

Is this some extreme circumstance not worth considering, to be sneered at by the usual apologists,  those who think of bullion very cynically as just a trade?  Don't worry, nothing to see here, move along. 

There is plenty of hyperbole on both sides of these questions.  I try not to add to it, but to keep going with what can be discovered, in the hope of shedding some light on the subject.   And so I tend to ignore the misleading statements or insubstantial comments made by those who are merely seeking an audience.  And I would urge those who are on the bullion side of things to tone it down to the facts as well, although the urge to be heard is often a strong allure.

If anything, I blame the government regulators and the exchanges for the opacity and lack of firm understanding in the markets for certain commodities.  If there was clarity, the amount of speculation would be significantly reduced.  But apparently they do not wish to do this for whatever motives they might have.

How can one have confidence in a commodity system in which prices are set on an exchange that rarely involves actual delivery, and whose inventory levels are issued 'for information purposes only' without audits?  

Given the recent experiences of those who held bullion claims with MF Global who were handed a dictated settlement, and the people of the nation of Germany who will be waiting seven years for the delivery of their property, I think not. 

There are always those who will say, 'no problem, nothing has broken yet.  Don't be an alarmist.'  And they will continue to do so until a thing finally hits the wall, and people get hurt.  And then they will have walked away, no longer to be found.   This is what happened at MF Global. And in the financial crisis of 2007-2008.  And continues to happen today.

As always, the devil is in the details and the leverage, and what has been hidden will be revealed.  Eventually.









11 July 2013

CME Reports That Brinks Has a Seventy Percent Decline in Registered Gold Bullion Supply


Nick Laird of Sharelynx.com informs me that Brinks is 'now being depleted' of private gold holdings.

I am following up to make sure that there has not been an error in reporting.  The CME reports these figures one day in arrears, on a weekly basis, so the chart below is dated July 9. 

I have extended the calendar axis a bit to show the nearly vertical drop in inventory of registered bullion. 

In referring to the registered supply at Brinks, Nick notes that:

"Brinks is now being depleted.   They have gone from 447,199 on July 3rd to 134,525 on July 9th which is a drop of 312,674 oz."
If this is correct, then this is a decline of 70 percent in the gold held in private accounts at Brinks in just one week.

If this is data is correct, it would not be too much of a stretch to say that this has the appearance of 'a run on the bank.'   Again, I will wait to see if the CME issues a correction for this.  It seems almost incredible.

Where is the gold going?  It was not transferred from the registered to eligible category, and does not seem to have been transferred to any other COMEX vault.  I suspect it is flowing East.  And perhaps it is being taken to replace gold that has been rehypothecated from custodial vaults somewhere.

Someone seems to know something.   Rather odd things are happening.

One looks at this and wonders, what next?  



10 July 2013

COMEX Gold Inventories - A Towering Citadel of Paper


Lower and lower, to new record lows.

Weighed, and found wanting.

Who is running this sideshow?

And where will it end?



Let's take a closer look at today's gold market action on the COMEX...





06 July 2013

05 June 2013

Comex Gold Registered Ounces Available Nearing All Time Low - The Risk of Rehypothecation


'What has been will be, what has been done will be done; there is nothing new under the sun.'

Ecclesiastes 1:9


"The commercial world is very frequently put into confusion by the bankruptcy of merchants that assumed the splendour of wealth only to obtain the privilege of trading with the stock of other men, and of contracting debts which nothing but lucky casualties could enable them to pay; till after having supported their appearance a while by tumultuary magnificence of boundless traffic, they sink at once, and drag down into poverty those whom their equipages had induced to trust them."

Samuel Johnson, Rambler #189, January 7, 1752

'Registered gold' is bullion in the Comex warehouse that is available to futures contracts standing for delivery.  There is also  a much larger category of ounces stored, at least according to reports by some organizations, that are 'eligible' to be sold,  if the owners of the bullion should decide to place them in the 'registered' category.

According to the chart below the number of registered ounces at the Comex are approaching a record low.  That in itself has some significance, but I think the point of this chart is that the registered category typically reaches these low levels at major market bottoms.

Simply put, owners of bullion are not willing to put their bullion up for sale at the paper gold market price set by Comex. They would rather let it sit in storage and pay fees.

Now, in addition to this, there is quite a bit of controversy and speculation that the bullion banks have been leasing out that customer gold that is being held in storage. That is what is known as rehypothecating.

Rehypothecating simply means that a financial institution uses an asset that is pledged as collateral for another transaction of their own. And these days these rehypothecation schemes tend to go to multiple stages like a daisy chain, or dominos.  Bank A takes a customer asset and lends it out to Bank B.  Bank B uses that same asset as collateral to Bank C.  And Bank C uses that same asset once again. 

We saw this first level rehypothecation in the collapse of MF Global. That company was using customer assets, whether they be cash, financial paper, and even actual bullion, as collateral with other banks, including JP Morgan it appears, to back their own private speculation in the markets. When the markets turned against them, the collateral was 'called' and the scheme collapsed.

What made that rehypothecation particularly odious is that such assets held by a clearing broker are considered untouchable and 'sacred.'   But as it came out in the aftermath of that scandal, we are indeed in different times with regards to oaths, pledges and obligations in finance.

This is not all that dissimilar in character to the Madoff scheme, which is why it is prohibited.  Customers provided the Madoff fund cash, the front men and Bernie Madoff took their fees, and then that money was committed to pay other fund obligations, notably the returns that investors holding paper obligations were owed if they chose to withdraw them. Madoff just cut to the chase and did not bother with the investment part of the deal.

So if there is a rehypothecation scheme going, and there is a run on the bullion banks at these prices, as customers refuse to voluntarily offer their bullion for sale, and other sources of supply become exhausted, eventually a 'market break' will occur and the scheme will be exposed.

And to complicate matters, it is likely that a significant quantity of gold has been leased out from central banks into these rehypothecation schemes that will not be easily returned.    This would be considered 'career affecting' and rather embarrassing to the governments.

Like the case of the Madoff fund, many people on the periphery of the transactions knew that there was a likelihood of fraud, and that at the very least, something was wrong.  But it is risky to say or do anything, and very lucrative to keep one's mouth shut and hope to plead ignorance of the scheme later on.  

Conspiracy is hard to prove unless one has 'smoking gun' admissions on tape, and too often not even then in this culture of fraud where the professional courtesy of moral hazard is more the rule than the exception.

I should note that even in the endgame stages of the exhaustion of a highly leveraged rehypothecation scheme, a more likely outcome would be to let the price of gold rise, and hope that this tempts new bullion supplies on to the market.  This would allow the cycle of this scheme can go along for another turn of paper selling and price manipulation. 

I do think that the spike in gold to $1900 was just such an instance.  And the opposite was tried in the recent price smackdown, because allowing the price to rise put some of the derivatives bets of the TBTF financiers at risk.  They have to work that short position down first before allowing gold to rise in price.

But I would not be surprised if they will try and frighten out holders of bullion with more price raids before this. That ploy eventually fails as the bullion passes into stronger, more sophisticated hands.  And the governments and people of the East are certainly doing their part to make it happen.

It will not be the registered inventory at the Comex going to zero that will break this scheme.  Rather the registered inventory at the Comex will fall to zero within the context of a general run on the bullion banks.  First one or two, and then a rush.  We may continue to see scattered shortages for some time first.  Confidence breaks over a long period of time, and then it collapses all at once.

This rehypothecation scheme has its roots in  the 1990's.  I think that the crucial turning point in this  occurred in 2000-2001 with the selling of England's gold in an act that became known as 'Brown's Bottom.'  It was likely done to rescue some bullion banks that had been caught on the wrong side of a bullion carry trade.

I do not think it is a question of if this rehypothecation scheme fails, but when.   I no longer doubt that there is a highly leveraged rehypothecation scheme in the precious metals markets, and probably others as well.  The circumstantial and direct evidence is just too persuasive. 

Since Germany apparently cannot have its 300 tonnes of sovereign gold back for almost seven years, one might conclude that only a relatively small amount of bullion is required to collapse this paper pyramid scheme.  We are likely in the endgame.

So let's see what happens. I think after the worst is exposed, people will remark how obvious it all was. It will be like the housing bubble, which really was the vehicle for the CDO pyramid scheme of mispricing of risk, abuse of collateral, and fraudulent representations of ownership and quality.

The western governments may try to impose some draconian settlement.  And I think most of the world, and a goodly portion of their own countries, will tell them 'to go shit in their hats,' as my old boss used to say.  And then the coverup will begin,  the small fry and scapegoats who were involved will be thrown to the wolves, and losses distributed to the innocent.  That is where we are now with the latest credit bubble.

The jokers who are behind these types of schemes are bad enough. They are despicable conmen, no matter how one wishes to cover up their schemes with sophisticated words and jargon.   Madoff was simply a thief.  And so were the responsible parties at Enron, MF Global, the LIBOR manipulation, the mortgage debt frauds, and so forth. 

These schemes of manipulating key prices and commodities is as old as markets, as old as the folly of greed.

The notion that markets are naturally virtuous and self-correcting are a ludicrous and harmful fallacy, generally nurtured by conmen who seek to corrupt them. 

But their enablers, those who facilitate the schemes and cons and who defend them too often for the rewards of position and pay, are just as bad.  And that net of culpability reaches further and wider, into the chambers of government and the halls of universities.

The perpetrators will be brought to account eventually. It is for us to see that justice is done in this world in accord with the law. And if the law is corrupt, it is our duty to work for its reform.

If you have your wealth secured in the right ways and places, you may not be overly affected by this scandal, except perhaps from some anxiety and scarcities of goods that will pass with time.  Life does go on.  These fellows are not necessary to the functioning of society. Quite the contrary, they are parasites.

I do think being prepared is a good idea.  But look at those who were ruined by Madoff and MF Global.  If you did not have your money with either of them, you were not affected all that badly.

I tend to think that this scheme too will be circumscribed a bit, through a coverup, and the printing of a virtual moat of paper.  And I think we all know how to deal with even a serious inflation whether we feel confident of it or not.   I still do not believe that a hyperinflation is likely. 

Those of us who lived through the serious inflation of the 1970's will remember what it was like.  Those on fixed incomes may suffer the most, and we need to make sure that the pigmen do not take advantage of them, or add to their misery.  And they will try. 

This latest crop of demi-gods knows no shame and has little self-restraint.  They are walking occasions of sin.  And they are always with us.  It is just that sometimes we let down our guard, and justice fails.

History repeats, and remarkably so, because we so easily forget what we and our forethers have learned, and succumb to the same old temptations and excesses of the few.




18 May 2013

Registered Gold At the Comex



The extreme lows in registered inventory tend to mark the beginnings of major advances higher.




10 April 2013

Gold And Silver Registered Comex Ounces - On Notes From the Bailout Boys


These are the registered ounces of bullion in the Comex warehouse.  Tightness is appearing in the retail physical market, but nothing is showing up here, yet.

If you need a reminder, a brief explanation of what registered and eligible ounces on the Comex means is here.

Janet Tavakoli is a very witty person, as well as being derivatives expert, a financial writer and a noted novelist.

She just sent me this via email:
Notes from the bailout boys:
Goldman 2013: With our economists expecting few ramifications from Cyprus.

Goldman 2007:  AIG presents no counterparty risk.




10 April 2012

Comex Registered Silver Inventory Falls Below 30 Million Ounces Again



Comex Registered Silver inventory has dipped back below the 30 million ounce level as deliveries and withdrawals bring it back down near historic lows.

Perhaps they can lease some from SLV as the situation may require. The central banks may stand ready to lease increasing amounts of gold for sale into the markets if the price rises too fast, as Mr. Greenspan had said, but they are fresh out of silver, and have been so for some time.

A dangerous and volatile situation it appears. I am glad that the Masters of the Universe are not 'directionally positioned' and are merely honest clerks, if not practically innocent maidens. That might turn out to be an awkward position to be caught in some day.

But it will put the lie to Daniel Drew, because I doubt any of them will be going to prison.
'He who sells what isn't his'n
Must buy it back, or go to prison.'
But that is not to say that there will not be plenty of 'bagholders' served up on the wrong end of the short side when the time comes. No honor among thieves, the big hanging the little, hedge funds for breakfast, and all that. If you are not among the financial illuminati even a cash settlement can be made rather painful and pricey, at least when they know they have got you, and on their terms.

You may refresh your understanding of eligible and registered inventory here.





20 April 2011

Silver: Eligible Versus Registered and About That Big Inventory Change at Scotia Mocatta



Let's refresh our understanding of the difference between registered and eligible status at the Comex. 

"Comex has two categories of silver in its warehouse.

The eligible category means that the silver is in a condition that conforms to the standards of delivery. Size and quality of the bar in other words. It is being stored at the Comex warehouse, but is not offered for delivery into contracts.

Registered means that the silver is available for delivery to those who demand bullion by being registered as such with a bullion dealer, in addition to being in a fit condition to satisfy the contract.

Eligible silver can become registered and deliverable if the owner of the silver declares it saleable at some price. And of course if it is there, and otherwise unemcumbered by senior obligations or conspicuous absence."

Registered Ounces Available for Delivery at the Comex

The eligible silver stocks and that of the daily metal warehouse statistics are limited to silver bars that meet the Exchange's criteria for delivery. This criteria specifies that a silver bar must weigh 1,000 troy ounces, plus or minus 10% and be on the Exchange's Official List of Approved Refiners and Brands for silver.

In order for eligible metal to become registered metal, the owner of the metal must have an Exchange Licensed Depository (like Scotia Mocatta) issue a Depository Receipt (Warrant) on those silver bars meeting Exchange standards comprising 5,000 troy ounces (plus or minus 6%) stored at its facility.

It is not a particularly difficult operation to change bars from eligible to registered status, and vice versa. It is a matter of the actual owner's intent. It is a little more difficult to have a new bar introduced to the warehouse and certified as eligible, meeting the criteria of the exchange as stated above.

Some traders use the term dealer to mean deliverable, and customer to signify eligible. 

There may be other types of bullion in non-standard forms, such as coins or odd or smaller bars, stored for a fee at Comex, but these are not of interest to us here.

Here is Harvey Organ's take on the silver inventory at the Comex this evening.

"We have just received tonight's inventory changes and it is a dandy. First of all, there were no deposits of silver into the dealer and no deposits into the customer.

There was a rather large withdrawal of silver from one customer of 119,400 oz ( from Scotia). We had another 999 oz from the Delaware vault. Thus total withdrawal: 120,399 oz.

Now the fun begins: We had a massive 5,287,142 oz adjustment whereby the dealer repaid a customer for a prior commitment or a seller had cold feet and decided not to sell his silver and it returned to eligible silver (not for sale) or this is a settlement whereby silver is finally delivered to a patiently waiting long.  Ladies and gentlemen..something is up!! The adjustment was in the Scotia vault. Let us see if this silver leaves the Scotia vault."

Turmoil in Silver and Gold at the Comex - Harvey Organ

I suspect the silver has been taken off the market for delivery into some obligation, for example, delivery to an outstanding purchase from a fund like the Central Fund of Canada, Sprott, or some other large customer, perhaps even a sovereign entity (hint here be rumours). But perhaps it is just a customer who has changed their mind about the prospects for silver.

This is what happened. It could be quite bullish depending on what happens to it, as Harvey indicated.

Here is Adrian Douglas' Marketforce Analysis summary of changes to the Comex Inventories.
SILVER

ZERO ozs withdrawn from the dealer’s (registered) inventory
120,399 ozs withdrawn from the customer (eligible) inventory
Total dealer inventory 35.76 Mozs
Total customer inventory 67.24 Mozs
Combined Total 103.00 Mozs

GOLD

139,996 ozs withdrawn from the dealers (registered) category
70,796 ozs deposited in the customer (eligible) category
Total dealer inventory 2.11 Mozs
Total customer inventory 8.90 Mozs
Combined Total 11.01 Mozs

Adrian's analysis appears each day after the market close in Bill Murphy's metals discussion at LeMetropole Cafe. This is where I first learned about the lesser known aspects of the metals markets in 2001 before gold and silver started to rally, and it remains a must read for me every day.

Remember we are entering a period of May option expiration at Comex, on Tuesday April 26th.

As I mentioned earlier today, something is obviously up. I am trying to get to some level of understanding of it, and am wading through rumours, innuendo, and speculation. But there is something happening behind the scenes, I am now sure of it. And it might be big, because the usual trading desk chatterers don't seem to know what it is. Or aren't talking.

But I am wondering, are the BRICs going to make their move?  Or is it something else.