Comex Deliverable Gold Still Out On the Tails of Leverage at 57 to 1

"Jim, lad, there be consequences an' then there be consequences. Devil take 'em all, says I, and pass aft the rum."

Robert Louis Stevenson, Treasure Island

The ratio of potential claims to deliverable gold remains at an extreme of 57 to 1, despite the pricing antics designed to shake off the standing longs, and to scrape out physical supply from wherever it can be had.

But the leverage remains quite high in what is normally a big delivery month of December. That so few longs have yet to be filled with physical bullion is interesting.

January is a non-active month.

So we will probably see continued volatility, more price bluffing maneuvers, and more disinformation from hangers-on, hired help, and useful idiots.  

The shorts are trapped, and it is just a matter of time until they have to let go and allow the price to rise. And the odd thing is that the producer/merchants have already read this and have shifted their shorts to the 'smart money.'

I think for now the gold bears' goal is for the bullion banks and hedge funds to get through the big December delivery month without breaking anything or losing control of price, even if they have to allow it to rise towards the end of year to permit more gold to come to delivery.  

And the Banks keep encouraging the funds to take those shorts on to the limit.  Hoo hah.

What is lacking is a major player who is willing to call them out.  So far the game is 'working' for everyone on the short term.  Those who want it are getting bullion on the cheap, and those who want to take their short term money are getting paid.

It will be an interesting month. I will be surprised if there is a resolution, and as you know I do not expect a Comex default, although a technical de facto default is always a possibility, as a fail to deliver and a force majeure. Not to put a fine point on this temporally, the Comex may be like the Battle of Stalingrad, but the Shanghai Gold Exchange is Kursk.

More likely the jokers will continue to try and bluff through year end and close their books, and regroup in January if they can make it without allowing the price to rise too far. They may keep doubling down and increasing their leverage. What could go wrong? This is how an LTCM and MF Global happens. They are a bit hard to predict because of the obvious opacity, but also because it takes some player or some incident to send them tipping over.

But it does seem to be in a spiral now as the physical offtake to Asia and strong hands continues. Most of the world sees the gold leasing scheme for what it is, even if those in the fog of the Anglo-American banking cartel do not. There the status quo maintains its studied silence, while the flacks continue to put up their smokescreens for their cronies and patrons. And it is hard to believe that there are those in official positions who are not aware, and providing support for this both directly and indirectly.

What a funny system of price discovery this is.  With a few minor variations, the ending seems almost inevitable. 

And yet we keep coming back to this place, again and again.  Wickedness is resilient, persistence, but the virtue and vigilant righteousness of the people seems to ebb and flow.

"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!

Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

From the original minutes of the Philadelphia bankers sent to meet with President Jackson February 1834, from Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

Comex and Shanghai - Gold and Silver Deliveries Compared Over the Last Five Years

I asked Nick of Sharelynx if he could wrangle up some comparison charts between the Comex and Shanghai for our inquiring minds.

Interestingly enough, Shanghai dominates in gold delivery, but Comex does reasonably well for silver over the last five years.    The new charts are shown below for both metals.

Comex delivered a total of 1,025 tonnes of gold, whereas Shanghai did 8,655.  And in the case of Comex much of their delivery had never left the warehouse complex until recently.  It went into customer storage and came back on a trade.  In Shanghai the gold must leave the warehouse.

In the case of silver, Comex has delivered 15,165 tonnes whereas Shanghai has done only 3,266.  But if you look at the Shanghai trend it is obviously growing at an accelerating rate in silver.

Interestingly enough, the delivery ratio of silver to gold at the Comex is about 15:1.  Again, we have to allow for the round trips that occur.

In the case of Shanghai the silver to gold ratio is skewed heavily to gold.  Gold seems to be the metal for China.   But that skew appears to be lessening in the past couple of years.

A comparison of the recent trends shows that the Comex is relatively light on deliveries whereas Shanghai seems to be accelerating

As a reminder, the London Bullion Market Association is the bigger Western delivery exchange, but its records are not yet available to us for analysis like this.

The source of these charts is the master data wrangler, Nick Laird.

Wages As a Percent of US Corporate Profits Lowest Since WWII

"Many thousands are in want of common necessaries; hundreds of thousands are in want of common comforts, sir."
"Are there no prisons?"
"Plenty of prisons."
"And the workhouses." demanded Scrooge. "Are they still in operation?"
"Both very busy, sir."
"Those who are badly off must go there."
"Many can't go there; and many would rather die."
"If they would rather die," said Scrooge, "they had better do it, and decrease the surplus population."

h/t Zerohedge

Gold Daily and Silver Weekly Charts - More and More Interesting

I am closely watching the December Comex gold contracts still standing. As of yesterday there were enough to pose a bit of a concern with the current amount of deliverable gold at the Comex, even with the recent additions.  

The price volatility, both up and down, on the Comex is symptomatic of the technical nature of the trading there now, with technical implying artificiality.

As I have said, I do not expect the Comex to be the locus of a break in the gold market, since it is not the focus of the action, which has now shifted firmly to Asia and the Mideast.  If the Comex should falter, it will most likely be because of a more fundamental break, or scandal, in the system.  but I can't rule it out, as a de facto if not actual default. 

Comex is becoming like a shell game, or liar's poker between ill-mannered children in suits, and it's really a shame.   But that is what happens when a society starts mistaking wealth for wisdom, and a trader's cunning for sound social or even economic judgement.  

Have a pleasant evening.