Time for more info on the December Comex gold contract. First, Dan Norcini gives us some context on the significance of yesterday's delivery notices:
(emphasis mine)
Also, I am monitoring the delivery process for the December Comex gold contract. Here is what we have for first notice day:
We had a total of 8,600 issued and stopped — to put it into perspective, the entire month of October was 11,554 deliveries. November, an off month, had 1,288 if my data is correct. What is curious is that Bank of Nova Scotia was the big stopper in the month of November but the first notice day for the December shows them as issuing 2,327 but stopping 3,523. It is hard to figure out what they or their customers are doing there but on balance they are still taking more than they are issuing. They are still the LARGEST STOPPER.
Credit Suisse is the largest issuer.
The "issuer" is the seller, and the "stopper" is the taker of delivery. Here is data from the COMEX delivery report:
DEL = short positions "stopped", which now needs to deliver gold.
ACC = long positions who issued delivery notices.
TENDERED/ACCEPTANCES | GC | 8-Dec |
DEL | ACC | |
GOLDMAN SACHS & CO. | 0 | 463 |
PRUDENTIAL BACHE COMODITIES, LLC | 122 | 0 |
DEUTSCHE BANK SECURITIES, INC. | 0 | 774 |
NEWEDGE USA,LLC | 966 | 0 |
RAND FINANCIAL SERVICES INC | 0 | 2 |
NFI DIVISION OF NEWEDGE USA,LLC | ||
BANC OF AMERICA SECURITIES LLC | 2,000 | 0 |
HSBC SECURITIES (USA) INC. | 0 | 1,893 |
MF GLOBAL INC. | 4 | 0 |
CREDIT SUISSE SECURITIES(USA), LLC | 2,585 | 60 |
STERLING COMMODITIES CORP. | ||
GREENWICH CAPITAL MARKETS, INC. | 0 | 43 |
GELDERMAN DIVISION OF FC STONE, LLC | 0 | 46 |
MERRILL LYNCH PIERCE FENNER & SMITH, INC | 0 | 3 |
THE BANK OF NOVA SCOTIA | 2,327 | 3,523 |
J.P. MORGAN FUTURES INC. | 308 | 227 |
TRILAND USA INC. | 275 | 169 |
R.J. O'BRIEN & ASSOCIATES, LLC | ||
F C STONE L.L.C. | ||
FORTIS CLEARING AMERICAS, LLC | 7 | 366 |
UBS SECURITIES, LLC | 0 | 978 |
BARCLAYS CAPITAL, INC. | 0 | 11 |
PTG DIV OF NEWEDGE USA,LLC | 0 | 9 |
RBC CAPITAL MARKETS CORPORATION | 0 | 11 |
ROSENTHAL COLLINS GROUP | 0 | 1 |
MBF CLEARING CORP. | 0 | 1 |
MF GLOBAL INC.-PIONEER DIVISION | 0 | 4 |
CITIGROUP GLOBAL MARKETS INC. | 6 | 16 |
ADM INVESTOR SERVICES INC. | ||
TOTAL | 8,600 | 8,600 |
These 8,600 contracts are calling for delively of a combined 860,000 ounces of gold. To put that in perspective, here is some data on COMEX's Warehouse Stockpiles taken directly from http://www.nymex.com/warehouse.aspx:
TOTAL REGISTERED | 2,804,270 |
TOTAL ELIGIBLE | 5,713,922 |
COMBINED TOTAL | 8,518,192 |
Finally, here is an explanation of the terminology of "registered" and "eligible" COMEX gold stockpiles from silveraxis.com:
For those who aren' t familiar with the terminology, the registered category of COMEX warehouse bullion stocks generally refers to gold and silver bars against which COMEX warehouse receipts are outstanding. The COMEX publishes these stocks on a daily basis and they can be found here: Silver Gold. The registered category is the total pool of gold and silver available at any time to meet delivery requirements under expiring futures contracts or to establish initial futures contract positions through a transaction called exchange-for-physicals (I' ll explain this another time). It is important to realize, however, that many parties holding COMEX gold and silver in registered form have no intention of making their holdings available for delivery. By this I mean that such parties are neither (1) holding a short futures position against the warehouse receipt nor (2) willing to sell their registered metal (warehouse receipts) to a party with a short futures position. Indeed, a substantial portion of those holding registered metal would have acquired the COMEX warehouse receipts by holding long futures positions for delivery. In other words, these registered stocks are held for investment and not for commercial purposes.
In comparison, the eligible category of COMEX warehouse bullion stocks generally refers to bullion held in the warehouses that meets the specifications of an acceptable COMEX bar (proper weight, size, purity and refiner) but does not have a COMEX warehouse receipt issued against it. For example, an investor might purchase several 1,000 oz. bars of silver from a dealer and then deliver the bars for allocated storage at a COMEX warehouse. This is a private arrangement and has nothing to do with the COMEX. Unless these bars are officially registered (the easiest way to do this is through the aforementioned exchange-for-physicals), they will remain in the eligible category until withdrawn from the warehouse by the investor. Thus, the appropriate way to treat eligible COMEX warehouse bullion stocks is that they represent metal that could potentially be registered at some point in the future but cannot presently be used to make delivery under a short futures contract.
My reaction: Based upon Deliveries of 860,000 oz, 31% of the COMEX's registered gold just got vaporized yesterday.
So many questions.
When delivery day arrives and no gold is delivered, then what happens ?
a) The DEL counterparty defaults and the ACC party sues for the difference between the COMEX price and the eBay price ?
b) the day before default, the DEL party is forced to scramble to buy physical gold on their credit card no matter what the cost ?
c) COMEX declares "force majeure" and closes ?
d) ?
Do you accept the GATA theory that banks shorting gold have driven the price down, causing this misalignment ?
Couldn't the COMEX price rise, crushing the shorts, and then carry on as before, without the end of the world ?
I'm not sure of the interpretation of registered vs eligible ounces. I would think the "registered" ounces are already spoken for, soon to leave the building. The "eligible" ounces seem to me to be the available stock pile to draw from. Once a long demands delivery, this adds to the "registered" pile, and the metal has to come from somewhere (perhaps the eligible pile). This is just my interpretation, I'm not an expert.
It seems some gold is taken from COMEX. But who are the recipients? Maybe that gold withdrawn today will be placed to COMEX again.
To answer your questions Dave...
No one really knows what is going to happen with all these delivery request. The COMEX is secretive exchange that doesn't provide much information to work with. The only certainty is that, no matter how they are resolved, it will be bullish for gold.
As for the procedure for taking Physical Delivery of gold from the COMEX, these are the steps:
1. Client buys the futures contract.
2. Client will take delivery between First Notice Day and the Last Trading Day.
3. On delivery day account is debited cost plus a $50.00 delivery fee.
4. We will provide the customer with name and phone number of the individual at the depository to contact.
5. Customer makes arrangements for the physical delivery
"Do you accept the GATA theory that banks shorting gold have driven the price down, causing this misalignment?"
It is a proven fact that central banks have interfered with gold prices before, so I see no reason why they wouldn't do it again.
"Couldn't the COMEX price rise, crushing the shorts, and then carry on as before, without the end of the world ?"
Not if investors start taking gold out of the COMEX's vaults. Without an underlying physical supply, the COMEX gold futures market has no credibility.
I was wondering why gold was down $30 this a.m. Now I know the answer.
Hmm I'm not really understanding something. This report states there is a lot of short covering and therefore demand for gold. Why then is gold price down today?
There you go. Nobody seems to care about this COMEX situation. Can you make ANY predictions in this kind of environment?
There is a lot of good information especially Jim Sinclair's site. In simple terms the financial world is in trouble but they do not want you to know it. So if gold were to rally too much people and therefore markets would panic. Solution: keep gold price down at all costs. Also I do not believe that all the paper gold is actually backed up by physical gold. Several mints in the world are currently not taking orders for certain gold products, i.e. coins in USA and Australia. I suspect that a change will come where currency is tied to gold or at least partially so. One of the major physical gold holders is not the US Treasury but the Federal Reserve ... so draw your conclusions. My bet is on gold ... but hey some people out there are still buying houses, go figure !
any more history on the delivery that have occured over time? I assume that deliverires have increased greatly...but does anyone have the data to show it?
2566 deliveries today?
Where is Banc of America getting all that gold they have to deliver?
It occurs to me that there are a couple reasons paper gold might go down:
1) People value the commodity less
2) People don't believe that their contract will actually yield them an ounce of gold.