by Peter Schiff, Schiff Gold:
Strange activity continues at the Comex!
Gold: Recent Delivery Month
Delivery volume for February was a little less than half the contracts open at first notice. 6,005 contracts were delivered with 7,370 remaining in open interest. This was a much larger relative delivery than December which saw less than a third of contracts delivered on the first day. Things seemed suspicious back in December, but this month had a potentially bigger red flag.
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Figure: 1 Recent like-month delivery volume
The chart below shows the drop from First Position (the day before delivery starts as a blue bar) into First Notice (green bar). As shown, the drop from blue to green was abnormally large this month.
Figure: 2 24-month delivery and first notice
The chart below more clearly shows the relative drop into close. 54% of open interest closed or rolled in the final day. The next largest roll amount over the last three years was 42% back in June 2021.
Figure: 3 Drop into Close
The chart below shows how February was trending very strongly. With three days to go, it was at the top range of open interest. Then the last two days saw a significant drop in contracts.
Last month, I speculated that gold was starting to look like silver did 18 months ago. This was leading up to the physical squeeze that was seen in silver in the second half of 2022. Silver started to see a lot of contracts drop on the final day before delivery started. The speculation was that supplies were tight so contract holders were being motivated to roll rather than deliver.
That speculation turned out to be accurate as the physical squeeze in silver really intensified in 2022 and prices recovered. Now gold is setting up very similar to silver on a 12-18 month lag. Does this mean that 2023 could start to see massive outflows from Comex vaults? The data shows that outflow has already started. If it were to intensify this year, that could really begin to stress the system. The Comex will have a tougher time defending the gold market than it did the platinum market.
Figure: 4 Open Interest Countdown
BofA is back in the market as a major buyer. They may be restocking the inventory they dished out in July and November. They have restocked to then be the backstop in the market when delivery volume sees a surge.
Figure: 5 House Account Activity
As mentioned above, the physical outflows have been underway for some time. Since last July, gold has seen more than 10.6M ounces flow out of the vault. If this picks up steam, the Comex will run out of gold before the end of the year!
Figure: 6 Recent Monthly Stock Change
The chart below shows total net daily change from the chart above. As shown, there is almost no metal flowing into the vault. There have only been 3 days of a net increase greater than 100k since July 1st. On the other hand, net outflows are seeing regular drops of more than 100k, oftentimes occurring multiple times in a single week.
