“Thus, it should be understood that when pro-US figures use the term, 'rules-based international order,' they are not referring to anything analogous to the rule of law. Quite the opposite, they are using Orwellian language to describe a system in which essentially no rules can be established and/or observed, given that the dominant state has the prerogative to violate and/or rewrite “rules” at its whim.” Aaron Good, American Exception
Showing posts with label Comex Gold Warehouses. Show all posts
Showing posts with label Comex Gold Warehouses. Show all posts
"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K."
Eddie George, Bank of England, From Reg Howe v. BIS, JPM et al.
"What is offensive is that they lie, and worship their own lying."
Fyodor Dostoevsky, Crime and Punishment
"It is in the gold lending market that the central banks of the world lend out their gold holdings to commercial bullion banks, where the physical gold is sold and shipped out, and where the central banks then claim to hold interest-earning ‘gold deposits’ with the bullion banks. These gold-deposits (which are merely a claim on a bullion bank) then mostly roll over short-term, passed around indefinitely between the clubby LBMA cartel of bullion banks, in a totally opaque behind the scenes network.
The physical gold bars lent out are long gone to Switzerland and the Far East, and the central banks then deceptively claim that they still hold the gold on their balance sheets when in fact all they have is a liability to the bullion banks. In the middle of this market sits the Bank of England, offering gold custody and storage to other central banks (in the vaults under the Bank of England headquarters in London) and offering gold accounts to the bullion banks concerned."
Ronan Manly, French central bank and JP Morgan team up to boost Gold Lending
The Dollar jumped to take the 114 handle today, off the weakness in the Euro, Yen, Pound et al.
This record Dollar strength poses serious earnings risks for dollar-based companies with international exposure.
Gold was hammered down to a multi-year low, along with silver.
Tomorrow is a fairly important Comex option expiration for gold, for the October contract.
What a surprise.
The physical inventories in Hong Kong Comex warehouses remained very thin.
Bonds are getting clocked by the rising interest rates, although the shorter term bills can be held to maturity.
Gold from the ETF selling may be some assistance, in addition to the usual Bank shenanigans.
Stocks were lower once again, with the SP flirting with the important CrashTrak prior low.
I don't think we have seen capitulation in the equity markets yet.
Or from the gold and silver cartels in NY and London either.
What is the old market saying, Sell Rosh Hashanah and buy Yom Kippur.
But the high ground seems to be a reasonable good position for waiting, as indicated many times here previously.
Or perhaps even more appropriate for this year, Sell in May and go away.
The atonement for the Wall Street financial assets bubble compels the Fed to continue to feed our children's future to the Moloch of the money men.
But in this as always, remember what is truly important.
"The most important problem in the world today is your soul, for that is what the struggle is about."
Fulton J. Sheen
There are the three great gifts of His tender mercy.
Although the silver did not 'go anywhere,' the registered (for delivery) category of silver dropped by almost 8 million ounces in one day.
There are now about 28.4 million ounces registered for delivery on the exchange, which is low compared to recent levels approaching the 50 million level.
For the first day of December, 493,800 ounces of gold have been taken for delivery at 1187.50. This represents a nominal first day delivery value of $586,387,500.
The 'big customer' at Goldman and the house account at Macquarie continue to disgorge their gold positions, in size, through the delivery process.
The buyers of these positions are the house accounts at HSBC, Nova Scotia, and JP Morgan, in addition to the big 'customer' at Morgan.
As for silver, the big deliverers of the December contract positions were customers at Goldman and Intl FCStone, and a smaller amount from the house account at Nova Scotia.
The big takers of December silver were the house accounts at Macquarie and JP Morgan.
As you may recall, JP Morgan is holding the biggest hoard of silver on the Comex in its warehouses, with over 81 million of the almost 179 million ounces of silver on deposit.
Still, if history is any indicator, these gold deliveries are merely the pushing of paper claims for a smaller percentage of physical silver around the plate, with little physical metal actually going anywhere.
Not so for silver, which continues to see large inflows and outflows of physical metal, especially in the warehouses of wholesaler CNT.
There was another big delivery day for the June Comex Gold Contract on Friday.
HSBC was the big 'seller' from its house account, as the big stopper for the gold bullion was the house account and mystery customer(s) at JPM.
This type of delivery volume is a very big change from more recent history in New York, and reminds one of the bigger volume days of 2006 and the years following into the crisis period.
What do I make of this?
Speculatively, any number of things, including increasing pressures on physical supply around the London free gold float, despite the re-repatriation of the gold bullion of the people of Venezuela.
But this sudden burst of activity on the predominantly paper Comex is a change of what has been customary, something different. I might be even more impressed if there was gold actually leaving the Comex warehouses, although given the times it may leave there through a proliferation of claims, and not ever physically leave the vault.
“Our clients will call up saying ‘I hear the Comex is running out of gold, what do you make of it?’ and our quick answer is that this is a non-issue,” Jeffrey Christian, managing director at CPM Group, said in a telephone interview.
“Even if you look at the fact that registered stocks have declined, the fact of the matter is most Comex futures contracts” are cash-settled, and traders don’t take delivery of the metal, he said.
While the percentage of Comex gold open interest covered by total Comex reported stocks has fallen over the past year and a half, it “remains very high by historical standards and presents no perceptible risk of imminent problems with deliveries,” CPM Group said in a report dated Sept. 14...
Barclays Plc said in a report this week that emerging-market demand for gold has shifted some metal into Asia, and that “coverage of physical stocks in Comex remains solid.”
“Anything that has more upside than downside from random events (or certain shocks) is antifragile; the reverse is fragile.”
Nassim Taleb, Antifragile
Gold is anti-fragile. This is why it must be handled with care, and not with fragile systems. Gold is intractable to the kinds of manipulation by the financial system that can bend paper to its will. This is why they hate gold, and seek to paper over it with leverage and secrecy.
Above is a commentary on the physical bullion situation at the Comex as it was reported at Bloomberg News yesterday. The 'deriding', which means ridicule and contempt, is coming from CPM group's Jeff Christian, and from a report from Barclays.
The title of the article is a bit odd, because I have not see any 'theories' about this subject at least here, just presentations of the facts using exchange provided information. And as for deriding, it seems more like a sign of weakness and fear than solid reassurance. But that is just my own experience in seeing that sort of thing when someone points out a changing situation that could pose a problem.
One thing the story fails to make clear is that only registered gold is deemed deliverable to fulfill futures contracts. Yes, all the gold in all the warehouses could potentially satisfy demand, IF IT WAS UP FOR SALE. But it is not.
The total supplies at the Comex have as much to do with the current demand for bullion as all the automobiles in your neighborhood have on the price that you are going to pay tomorrow for a used car, eg. the calculation cannot include items that are not up for sale. Yes there are many cars that would satisfy your requirements. But only those that are for sale are available for you to drive home.
Jeff Christian says that "even if you look at the fact that registered stocks have declined..."
Yes, 'even if' you look at the heart of the argument, 'registered stocks have declined,' and that is quite the understatement of the facts.
Here is the history of 'registered gold bullion' on the Comex going back to 2001.
And of course if almost no one asks for any of the gold, then there is no problem. Yep.
This is the problem. For anything except speculating with paper the Comex is now significantly fragile, moreso than at any time it has been in the last twenty years at least.
Jeff goes on to say that "most Comex futures contracts” are cash-settled, and traders don’t take delivery of the metal,"
And that is correct. Here is the history of deliveries, ignoring any cash settlements, on the exchange.
As should be easy to see, the amount of gold bullion deliveries is declining quite a bit.
The Comex lacks the market discipline of delivery of the goods and restraint on the potential hypothecation of available supply. What is acting to hold leverage to some reasonable level other than 'nothing has broken yet.'
Let's take a quick look at the ratio of total contracts to registered gold, that is gold up for sale.
The Comex is a significant price discovery market for the global gold supply. The data shows that it has diverged significantly from the physical bullion markets primarily in Asia.
While the inventories at the Comex remain flat overall and declining sharply with regard to deliverable bullion, the physical deliveries of gold into India and China are increasing steadily.
And I hasten to remind everyone that gold is truly a global market.
Nick Laird at sharelynx.com has created chart that tracks the known physical gold demand for what he calls 'The Silk Road.'
Even though I do not expect a default at Comex, as I have said many times before, the point is that if there is even a mild problem in one of the physical markets in Asia or London, the Comex is price positioned for a market dislocation and potential fails to deliver bullion on request.
The deliverable gold is a little under 6 tonnes. But even if price were no object, the total gold held in private hands in all the Comex warehouses is about 6,716,000 troy ounces, or roughly 209 tonnes. That is all of it no matter who owns it or why.
Or less than one month's supply for the Silk Road countries.
Normally none of this *should* be problem, although one has to admit that according to historical norms the amount of deliverable gold is very thin by any measure. Why is this? Why are the better informed withdrawing their bullion from the deliverable category? I read that they are afraid of the bullion being caught in a 'short squeeze,' but the trader who said that did not specify a short squeeze where.
This week I learned from an interview with Jim Rickards that some very large bullion banks were said to be using the Comex gold futures to hedge shorts in bullion delivery markets in London, called the LBMA.
That kind of a hedge might work to guard against paper losses, but against a genuine fail to deliver in a physical market you can see that the immediate deliverables at these prices are about 6 tonnes, which is a rounding error on the Silk Road.
It's the fragility, always the fragility.
What if something that is not completely normal and expected happens? What if, instead of 2% of the contracts asking for delivery, a delivery short squeeze in London prompts 4 or 5 percent of the contract holders to attempt to exercise their contracts to receive physical bullion to cover their obligations elsewhere?
The fragility of such an arrangement is bothersome to anyone from outside who looks at it from a systems engineering perspective.
If some firms are using the Comex as a backup system for gold deliveries in London and points east, it is hardly equipped to take that role without a significant market dislocation in price.
If I was only working short term trades and would never mind a settlement in cash, then the Comex seems like a fine place to do the trade.
However, if my goal is to have a solid claim on physical bullion, even within some reasonable length of time measured in several months, it does not appear that the Comex is appropriate for that particular objective.
Do you see the potential problem here that is so blithely 'derided?'
I do not wish to alarm anyone. I am putting out the word because I do not think people understand the situation that has developed, over the past two years in particular, as shown by the potential claims per ounce.
Globally huge market with increasing demand, a market where the available inventories are exceptionally thin, and a price that is derived without a tight rein on leverage and the discipline of delivery. What could possibly go wrong?
The usual retort is 'it has not broken yet.' Yes, and in the light of our experience over the past ten years or so, some might find rather thin comfort in that. The important thing is for traders and investors to be fully informed, that they may use financial instrument in a manner that is appropriate to their objectives.
For example, using Comex as a backup for bullion positions on the LBMA might be fine, if you are not expecting to receive delivery of bullion that can be used to satisfy your obligations there.
The exchange might consider another look at their rules in the light of this unusual 'leverage' of potential claims to bullion, rather than count on price fixing all problems, and few standing for delivery, especially in a changing and very dynamic global market.
I do not have good visibility into the leverage and available inventories at the LBMA in London. If those are in any way similar to the Comex, then I would take some action fairly quickly to secure my ownership of bullion given the potential for a misstep that spins out of bounds.
If you hold an allocated receipt that is as 'good as gold?' Tell that to the investors who used MF Global, and found their holdings sorted out in court against a lawyered up megabank.
I do not know Jeff Christian or the fellow from Barclays. I am sure that they have good reasons for what they are saying and the advice they appear to be giving to their customers. I am sure they can all work out all their concerns and particular issues among themselves.
Objectives amongst customers do vary and it is the fiduciary duty of any advisor to help them make an appropriate choice. And I can see many uses for Comex positions that are entirely suitable for some. A short term trader for instance, who in merely placing wagers that he expects to settle for cash.
But as for this article in Bloomberg, it is a bit of a gloss, heavier on the deriding and short on information for readers to use in making their own informed decisions. 'Trust us' and 'nothing has broken yet' are, as I said previously, non-starters these days.
I have set forth only a few of the oddities that are becoming apparent in the gold market. There are quite a few more, including backwardation and tightness in the London physical market as noted by Peter Hambro and an analyst at Mitsubishi recently, and in articles by Koos Jansen and Ronan Manly.
How about the pivotal London market, is it 'well-supplied?' How well supplied is it? What is the potential impact on the Comex of a bullion shortfall at the LBMA?
Has there ever been a 'stress test' of what it would be like at the Comex if there were an afternoon failure to deliver physical bullion in London? Or are you assuming as your baseline that such a shortfall could never happen in any non-Comex market? Is the process at Comex for some event like that, besides halting the exchange and forcing cash settlements?
I do think that one can become so involved in a system, for so long a period, that when it changes, when the market dynamics start shifting, the old hands may be the last to notice the forest for all those familiar trees. That is why companies bring in quality teams to inspect their processes for soundness and failure points.
What could have possibly changed in the global gold market in the past few years. "Barclays Plc said in a report this week that emerging-market demand for gold has shifted some metal into Asia,"
How about this? Some shift. Some metal.
Here is what Kyle Bass recently had to say about the situation. Maybe you can 'deride' him. Then again, maybe not.
I see that the apologists for the status quo are actively 'refuting' the tightness of physical gold in the London markets, largely by ignoring that and concentrating on the Comex, which they assert is 'well-stocked.'
Clever people learn from the political process to ignore the tough questions that they do not wish to answer, and to misconstrue the question into whatever it is they would rather answer, often squirming through the issues to put some proposition in the most favorable light for their firms.
So we see this in so much commentary from the bullion bank and trading house apologists this past week. I won't dignify them by citing their names, but I think you will know who they are.
Peter Hambro's recent point was fairly clear. It is almost impossible to obtain sizable amounts of physical gold in London which is the center of the Western physical gold trade.
"It is virtually impossible to get physical gold in London to ship to those countries now. We get permanent requests in Russia now. Would we please sell our physical gold to India and to China?
Because there is not enough physical about. There are endless promises. And I worry that the market, the paper market, could be stamped on and people say 'sorry we're going to have a financial closeout' and it's all over. If you want to be in the gold business, you ought to be in the physical business."
Peter Hambro
The gold apologists bravely assert that there is plenty of gold in the Comex, relative to the demand there. Never better. More on that later.
As I have pointed out on any number of occasions, the amount of physical gold in all of the Comex warehouses of any categories is a rounding error on the physical markets of Asia. As I said the other day:
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.'
That was the key point that the apologists are ignoring. They ignore the physical market, and concentrate on a scenario at the Comex which is becoming almost atavistic, but still worth noting nonetheless as a kind of barometer. Comex seems to have lost its position as a source of genuine price discovery relative to the greater market of physical demand and supply.
The Comex gold warehouses, all of them, are a rounding error on the physical gold demand in India and China alone. The Comex serves as a diversion from the developing situation with the supply of bullion.
As you know if you frequent this site, there is an interesting phenomenon of diminished deliveries and stocks of gold at Comex that is 'for sale' that extends back to 2013.
Further, the volumes of paper contracts traded against the physical backing for them is reaching unprecedented numbers of leverage, even going back twenty or more years.
Yes Comex is well supplied in relation to its deliveries if one is to assume that it is just a betting parlor unrelated to the physical market worldwide for which it presumably provides price discovery.
And so his concerns are answered by apologists again pointing to plenty of supply on the Comex.
Anyone who questions this situation, who looks at the data, who sees the almost daily slamming of the price of gold into the London PM fix and the New York trade, is obviously a hysterical conspiracy theorist, right? And we must do what is required to intimidate them, to shut them up.
After all, what could be odd about such a multi-year pricing pattern like this in a market that purports to genuine price discovery, not for two cities alone, but for the world?
One *could* explain this by saying that Asia is buying, and the West, particularly London and New York, are selling. And you could cast aspersions on the foolish Orientals for wasting their money on 'pet rocks.' All of this has been done.
That is not the point. The point is that there is such a phenomenon, it is valid, and it tells us something that some people apparently do not wish us to think about.
Given the opaque nature of the markets, and the lack of honest disclosure and discussion of what is happening, it is difficult to engage in reasoned arguments about this, especially when the sides quickly degenerate into hysteria, name calling, and all too often in search of headlines.
It happens on both sides of the argument, although I will confess that the paid professionals are getting rather good at it, and may confound many. Clever boys are well taken care of by this foul and rotten financial system. Oh you think I exaggerate? Where have you been the last ten years?
No, this situation will be resolved by a hard failure to deliver, and most likely in London or Switzerland. The last place I will look for a clear indication of the market is at the Comex, although as Hambro was suggesting it is likely to be significant collateral damage. That is what he said.
And then when that tide goes out, we will see who is who and what is what. And we may have to wait awhile. But given that so many major markets have been proven to have been manipulated for the benefit of a few powerful firms, even though perhaps justice has not been done and settlements made without criminal admission, I think questioning the odd events and integrity of this particular market is certainly worthwhile in the light of its recent performance.
And for my own part, the arguments that seek to 'explain' the oddness in these markets are found to be wanting at the very least, and disingenuous in far too many. But I understand that one must do what their position requires.
So tell me fellows, is London well stocked relative to gold available AT THESE PRICES? Are we secure in the knowledge that continuing levels of demand from 'Chindia' and elsewhere will be met AT THESE PRICES? Is the true state of the Comex and the LBMA transparent to all market participants?
The total amount of ALL gold held by ALL market participants at ALL the Comex warehouses, whether it is on offer or not, is about 218 tonnes. That is less than one month's demand for physical bullion in China and India and India alone. And by far the vast majority of that gold is not for sale AT THESE PRICES.
And given the leverage of paper claims everywhere, not just Comex but at the more important LBMA, and one can see that a misstep by the gambling goofballs of Wall Street could lead to quite a messy market situation. This also is what Peter Hambro said.
Oh no, they would NEVER overextend their positions in the quest for easy money. Who could even think that?
It is good to keep a level head, and be guided by common sense. And I think it is all too easy to fall into the habit of either shutting up and keeping your head down, or answering ridiculous excuses with equally ridiculous assertions, and so leave the poor bewildered investor in a state of confusion.
Let's recall what Kyle Bass, who is not so easily dismissed as a 'crank' had to say.
“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.
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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