Comex stock removals slowed but didn’t stop
This analysis focuses on gold and silver on the Comex/CME futures exchange. See the article What is Comex? for more details. The charts and tables below specifically analyze Comex physical inventory/stock data to show the physical movement of metal into and out of Comex vaults.
Registered = Warranty issued and can be used for Comex delivery, Eligible = Warranty not included – Owner has not made it available for delivery.
In December, the number of registered metals in gold increased very modestly, by 45 thousand, but since then all this metal has gone, and then in January the number of registered metals fell by 265 thousand. Now gold has 9 months in a row when the metal leaves the vaults on a net basis.
Rice. 1. Recent Monthly Stock Change
Despite somewhat slower outflow rates, there is no doubt that the metal is still leaving. The chart below shows daily activity that has subsided, especially last week as the market prepares for the start of February deliveries. More on this next week.
Rice. 2. Latest monthly stock changes
Mortgaged gold also began to fall again after a recent increase in December.
Figure: 3 pledged gold assets
Silver ended December with a slight net gain in both registered and eligible. As with gold, those gains have more than halved since then ($1.5 million). in in December against 3.7 million outside for January so far).
Rice. 4. Latest monthly stock changes
The daily activity for silver was much higher than for gold. While we don’t see the massive outflows seen last fall, January still sees metal move out of storage.
Rice. 5. Latest monthly stock changes
The table below summarizes movement activity over several time periods to better demonstrate the magnitude of the current movement.
- Over the past month, net gold holdings have declined by 1.8%.
- This was due to the fact that 675 thousand ounces left the registered
- Since last year, total gold reserves have fallen by 32% or 10.7 million ounces.
- Over the past month, net gold holdings have declined by 1.8%.
- Over the past 30 days, registered silver ounces have seen a slight decline of 476 koz.
- Eligible was defeated, losing 3.3 million ounces
- Nearly half of them came in the last week (1.6 million ounces).
Palladium and platinum are much smaller markets, but perhaps this is where the market will break through first.
Without resupply of platinum, Comex could have fallen short of its obligation to supply all of the required physical metal. Unfortunately for the Comex, they just bought time before the April contract went live.
Rice. 6. Summary of stock changes
The following table shows activity by bank/owner. He drills down on the numbers above to see the movement that is specific to the vaults.
- Vault movements were a bit quieter last month, but outflows were spread out.
- Manfra gained last month but lost it this month with a net drop of 7.2%.
- JP Morgan continues to lose ounces, down 350,000 ounces (3.8%) for the month and 4 million ounces (31%) for the last year.
- Every vault lost inventory in the last year
- Silver has seen a lot of shuffling between vaults
- CNT and Manfra were the biggest losers, receiving 5.3 million and 1.6 million outflows respectively (-18% and -11%).
- JP Morgan and Loomis added over 1.7 million ounces each
Rice. 7 Stock change detail
Zooming out and looking at stocks of gold and silver shows just how big the current move was. The black line shows “Registered” as a percentage of the total. Inventories declined evenly across both categories, so the black line remained relatively stable even as inventories declined.
Registered was hit hard in October, dropping to 45% of the total before recovering to 50% in preparation for December delivery. With the February contract on deck, Registered fell below 49%.
Rice. 8 Historical rights and registered
Registered silver continues to be at multi-decade lows. There is simply not enough metal in the vaults. Currently registered accounts for 11.2% of all available metal. This is less than 28% in December 2021 and 40% in September 2020. Registered metal is available to meet shipping demand. As Comex stocks intensified in 2022, there was little that could be done to replenish depleted stocks.
Rice. 9. Historical eligible and registered
The chart below only focuses on Registered to show the steepness of the current fall. Registered grew to 152 Moz in February 2021. Now that number is around 33.2 million. Over the past few months, recorded reserves have been pretty tight at 33 million ounces. A little bit of metal will go into Registered and leave immediately. Perhaps 30 million ounces is really a floor, not 0.
Rice. 10 Historical registered
Comex isn’t the only vault seeing significant silver outflows. The LBMA silver holdings are shown below. It should be noted that most of the holdings shown below are in ETFs. Despite this, overall stocks have declined significantly. December was the first increase in more than a year, and it was very modest, around 550 koz.
Rice. 11. LBMA Silver Reserves
Available supply for potential demand
This inventory reduction has had a major impact on Comex’s coverage compared to available paper contracts. There are currently 4.4 paper contracts in the Comex vaults for every ounce of registered gold. This is above the low of 3.6 paper contracts in December. This was driven both by a surge in open interest from 424K to 491K and by the contraction in supply noted above.
Rice. 12. The ratio of open interest to reserves
Coverage in silver is much worse than in gold: 20 paper contracts for every ounce of inscribed silver. This is a significant increase from the 17 paper and physical relationships seen back in December. Essentially, if less than 5% of open interest in silver was for delivery, that would wipe out registered silver. It’s a dangerous chicken game!
Rice. 13. The ratio of open interest to reserves
The raids on Comex storage facilities continue even if stocks are not depleted at the same pace as they were in mid-2022. What happened in the platinum market is an early indication of what will happen to silver and then to gold. Platinum saw more supply contracts than were available in Registered. In response, Comex secured a record number of cash contracts and struggled to restock as quickly as possible.
The same activity is showing in silver as stocks continue to fall. If silver sees even one large volume of deliveries in a month, this could set the situation in motion. The last domino to fall will be golden. This progression makes sense since small markets always break first. If the Comex market crashes, the price of gold could become volatile.
The paper supply has been helping to dampen the price for decades, and if the credibility of paper gold evaporates, the premium to physical gold could quickly reach record levels. Better get physical metal before It happens.
Data source: https://www.cmegroup.com/
Data Update: Daily around 3:00 pm ET.
Last updated: January 19, 2023
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