COMEX’s Gold and Silver Futures Market Does Not Combine Trade Data


We are very interested in the gold and silver futures market since June. We can see an increase in demand for physical metals against short futures positions. And indeed, the heat has seen considerable “distributed” physical metals among players in the COMEX futures market.

So far in 2020, the exchange has seen 132,999 contracts for 100 ounces of gold, valued at $ 25.7 billion. Silver deliveries have been even more exceptional in 2020, with 43,798 contracts for 5,000 ounces of silver valued at $ 5.8 billion.

Source: CME Group

These are large numbers for the precious metals market which do not regularly see so much physical disposal in a year. The vast majority of contracts are rolled over to the next available delivery months, or settled for cash.

Silver Body MonthlySource: CME Group

This basically means that market players want to take the metal out of traders’ hands and keep it in safe storage. And while the number of physical deliveries is staggering this year, the gold being taken from the market is linked to the technical crisis in 2000. The following chart, for example, shows that most of the gold stored in COMEX is allocated. The “eligible” category, which is vaulted storage and is not used in futures market trading. See the chart from Goldchartsrus.com below.

COMEX Qualified Gold StockSource: Gold Charts R Us.: Silver.:. PGM:.

So the fact that suppliers have attacked metals is not surprising, and it may be that we are in a small squeeze in the market for metals. While COMEX claims that there is enough gold in registered gold to satisfy current delivery, we have begun to see some discrepancies in the data that possibly portray a different picture.

Shadow contract

On 28 augustThOn the last day of the month to roll the current contract of September into the next active contract month in December, we see that CME Group is reporting an open interest of 3070 contracts. See screenshot from CME website below.

September 2020 Open Interest MaxSource: CME Group

What is interesting is that you are not able to give more contracts of ounces of gold in a month, for which you have an open interest, because you can only distribute against open contracts. Typically, we see many contracts rolled out until the last day and then the rest is settled. But as of September yet, the CME group is reporting 3457 contracts posted for delivery or 387 over 3070 that should have been available to be posted. And we are only 6 days into the month of September at the time of this writing.

September COMEX Gold Delivery NoticeSource: CME Group

What does COMEX provide? We are not sure, but it certainly looks doubtful that we have a “shadow” contract on COMEX for delivery. All of the CME group, or the accountant of the CME group, should be fired for failing to do basic mathematics correctly.

Errors can be forgiven if they missed the amount of paper futures contracts from one month to the next. Well, not really, but it would at least have little effect on the overall value of gold. Why is it like this? Because as we have shown many times this year on our site, when physical deliveries occur, the prices of gold and silver always move.

And this is expected, because while COMEX allows many paper derivative contracts to be placed as bets at market price, we only have a limited amount of real metals available in the market at any given time. They cannot be printed at the push of a button on a computer like paper may contract. This has two effects on the market.

First, when physical deliveries are terminated, paper contract derivative trades exceed the short-term speculative interest in the metal that those willing to take ownership. Secondly, and perhaps even more importantly, it overstills the amount of physical metals available for delivery in the futures market for those who wish to take delivery. This is basically too much to commit fraud, such as your bank claiming to have enough cash for your withdrawal, and then notifying you when you showed the bank that you need 2-3 to receive your cash. Will have to wait for the month.

Contract quantity inconsistencies

Since we are looking at COMEX so keenly this year, we have seen some other discrepancies in the volume of contracts reported on COMEX. The next series of screenshots show various daily reports in which the CME group reported more physical deliveries that day than the volume of closed contracts.

It again appears that physical gold and silver are being exchanged without any related contracts being closed. Does this mean that gold and silver are being raided in the Comex market without settlement of any forward contracts? You can decide this for yourself, because the CME group has not provided the necessary transaction data “right up to” their total trading volume, from an audit perspective.

GoldTuesday Sept 1 Gold Daily Report

7 September Gold data reportSource: CME Group

silver

COMEX Daily Silver August 31 ReportCOMEX Silver Daily Report on 1 September

Source: CME Group

Take a deep look

I interviewed Kirian van Heist, Which has been tracking this data for months. When it started a few months ago, we follow up on its figures, and discuss what it means for the price of gold in the long term.

To express views

Given the shadow contracts and discrepancies in daily contract numbers, COME poses a question on all the gold and silver market data reported by the CME Group for the market. Who knows how long mistakes in accounting have been allowed to exist. Just because CME reports a number, I do not know of any audit of the published transaction data to guarantee its authenticity.

If the market is misrepresenting the amount of open contracts and physical gold and silver deliveries, how can market participants rely on this data to make trading decisions on the futures market?

Furthermore, how do we now value the gold and silver prices used in our daily physical transactions? We do not answer this, and it will lead to a new era in which the public sees the gold and silver market. While these shadow transactions exist in particular, I expect the market to heavily question COMEX’s reported physical inventions. Just as fear of cash shortages will lead to a run on the banking system, fear of physical precious metals may lead to a run on whatever is left in COMEX’s warehouses.

Then we will see a rapid change in the prices of gold and silver, which will have to be determined off-exchange. It appears that the exchange of physical markets by large parties, from banks to the rich. It can be very difficult to hunt gold and silver from their current owners, if they are unsure if the current prices are high enough to price them properly.

And then what happens to the miners? If they do not have a valid pricing mechanism through COMEX, how do they forecast the prices of metals for their mine business model? We can see the rush of independent contract negotiations from traders using the metal directly for the miners producing it, completely bypassing the exchange model.

We will see how long CME futures data reporting problems persist. But it is becoming clear that the system the world uses to value precious metals can undergo rapid changes when the world realizes how unstable this system is at present.

Disclosure: I / We do not have a position in any of the stocks mentioned, and have no plans to initiate any of the positions within the next 72 hours. I wrote this article myself, and it expresses my own opinion. I am not getting compensation for this. I have no business relationship with any company whose stock is mentioned in this article.