by Peter Schiff, Schiff Gold:
“How did you go bankrupt?”
“Very slowly at first, and then very quickly?”
The data shows that the Comex is in the middle of experiencing a run on its vaults that is really taking its toll and continuing to accelerate. If you read no further in this analysis, first just take a look at Figure 8 and Figure 18 – those two charts will tell you everything you need to know about the impact of the vault exodus.
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Before we jump there though, let’s go through the standard monthly data.
Gold: Recent Delivery Month
Delivery volume in November started strong with 1,680 contracts delivered.
Figure: 1 Recent like-month delivery volume
While this looks relatively small compared to past minor months, there are two things to note. First, heading into close, the open interest was surging (red line below). Typically, open interest falls as contracts roll into the close, but in November, contract holders were increasing their position as they looked to take ownership of physical metal.
Not shown below was a very late increase in October net new contracts, which further lends credit to the very recent demand for physical.
Figure: 2 Open Interest Countdown
The second thing to notice is that open interest is still relatively high (2,301 contracts) and the volume of net new contracts has been increasing lately (red bar). This means that November is just getting started. Given the strength into the close, it’s likely November will also see high volume of mid-month contracts (these are contracts added within the month for immediate delivery).
Figure: 3 24-month delivery and first notice
On the first day, 40% of contracts were delivered which is fairly standard.
Figure: 4 Delivery Volume After First Notice
The bank house accounts have stayed relatively active in the delivery volume over the past few months. One thing to note is that BofA has left the market over the past few months after being very active for the past year.
Figure: 5 House Account Activity
While delivery volume has been strong and even increased (delivery means a change of ownership within a Comex vault), the real action has been in metal leaving the Comex system entirely. This can be seen below by the steady removal of metal from the vaults.
I keep waiting for this to slow down or even reverse… but it just keeps going drip, drip, drip out of the vault daily.
