Registered Gold On the COMEX Breaks the Million Ounce Level

Relative to the amount of contracts open the amount of gold held for delivery at these prices is somewhat 'thin' to say the least.  And relative to the global physical markets the amounts held at COMEX are almost too small to really matter.  And yet this is where prices are set.  At times it appears like a game of 'liars poker.'  How apropos.

If there is any good news for the gold bears it is that the first delivery notice for the next active August contract is three weeks away. The open interest for August is now a little more than 197,000 contracts, representing a potential 19,700,000 ounces of gold that could be called.

That a large number of contract longs would stand for delivery is highly unlikely to say the least, since COMEX is large a paper or virtual market place. But at a 20:1 leverage based on current deliverables, the possibility of a demand for delivery in excess of available supply is certainly a possibility.

That would represent an interesting situation. I don't know what would happen, and won't hazard any guesses.   I would imagine that a declaration of force majeure  and a forced cash settlement is most probable, along with hikes to 100% margins, except for privileged insiders.

Specs who get caught short may find the Big Banks, who are now largely covered,  to be rather unforgiving in their demands for any settlement.  I wonder which side the Exchange would favor. 

I am still chuckling to myself about the smirking pundit this morning who suggested that naked shorting of gold contracts on the COMEX would be a nice approach for the speculator to try and ride gold lower.  This was before gold rocketed higher later in the day.  

He who sells what isn't his'n
Must buy it back, or go to prison.

Daniel Drew

Although if you are particularly well connected politically, charges are entirely out of the question. It's nice to know the king.

The way eligible gold is fleeing the COMEX vaults, it also seems that some private holders of bullion may also be concerned about a 'bail in.'

Gold Daily and Silver Weekly Charts - Fed Minutes, Bernanke Speaking, Taper Schmaper

Bernanke will be speaking shortly in Boston. That may help to prod these thin markets.

The Fed minutes moved everything quite strongly, by introducing roughly nothing new.

Gold and silver popped for a while today, but then were beaten back into the close. I thought it was cute that during the day a trading pundit was describing what a great play it would be to short gold on the Comex futures market, shortly before gold went on a tear from the Fed minutes.

Futures on the Comex are gambling, not investing. And that goes double for options.

The market structure, including the price of borrowing, is rather bullishly set. If we get a real breakout they may be carrying some of the small specs out on stretchers. But that is a big 'if.' Taking out the 50 DMA would be a nice change of pace.

Have a pleasant evening.

 

SP 500 and NDX Futures Daily Charts - Techs Are On a Roll, Financials Not So Much

The 'big tickle' in the markets today were the Fed minutes, which basically said nothing new, but made the markets pop, drop and pop again before setting into roughly unchanged on the day, except for the big tech juggernaut which is on a tear.

In Case You Were Wondering What Just Moved the Markets...

The Fed released their minutes from their June 19 meeting.

The headlines that flashed indicated that while some on the FOMC feel that taper can begin soon, the consensus seems to be that greater labor gains will have to be seen first before there is any tapering.

Note that 'taper' does not mean 'end.'

Some saw fiscal policy as restraining economic growth. While I imagine they mean the sequester, I would add that the maintaining of a broken and highly corrupt financial system as a tax on the real economy propagates stagnation.

I am still reading them. I did take time out to buy additional volatility off that spike as a hedge to the new silver in my portfolio.

Bernanke speaks in a bit, and market attention will likely fade from the minutes, which really said nothing new, and turn towards that latest shiny thing.

How can even casual comments by the Fed move the markets with such force? Because the Fed has become the market, so great is the confluence of policy errors and crony capitalism in the banking system and the government.