18 July 2013

COMEX Registered Gold Falls To Another New Low Ahead of Option Expiration and August Delivery

Registered gold on the COMEX falls to another new low for this bull market, to below 30 tonnes.

I enjoyed the perspective Harvey Organ put on it this evening.
"Tonight, the Comex registered or dealer inventory of gold lowers again and remaining below the 1 million oz mark to 950,441.152 oz or 29.56 tonnes.

This is dangerously low especially when we are coming up to the August delivery month.  Remember in June we had almost 31 tonnes of gold stand for delivery."
Perhaps I am missing something but one has to wonder what goes through someone's mind who is short into a market structure such as this, wherein the ability to deliver into demand appears to be increasingly impractical. Do they think that they are operating on insider information? Are they?

Or is this just another example of reckless disregard, fostered by large bonuses playing with other people's money?

If gold starts to run, the ensuing rush to the exits could be rather impressive.

Nick of Sharelynx.com does a rough calculation of the open interest/registered or dealer's gold. The number of owners per ounce is up to a bull market high of 46 claims for every ounce registered as deliverable.  There is a chart of this below.

Granted that this is not a realistic expectation, that everyone would stand for delivery, but it is an interesting metric that shows the relative balance between paper claims and physical reality.  No wonder the Gold Forwards have been negative for the past nine days. 

Let's see what happens. Confidence in the US commodities business has been racked by scandal after scandal, from price fixing to the theft of customer accounts. Little enough effort seems to have been made to reform it, to make it more transparent and efficient in price discovery.  The attitude seems to be that if you don't trust the markets, so what?

I am not saying that they will not be able to finesse their way through August.  There are plenty of ways to do it, higher prices being the text book example.  But one has to wonder how long they can keep this up, especially if the storms in the currency markets start blowing come November.

Stand and deliver.