Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter


Comex Registered Gold Inventory Levels Leveraged At 65 Potential Claims Per Ounce

Commodities / Gold and Silver 2013 Dec 01, 2013 - 01:00 PM GMT

By: Jesse


"A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules." Jorge Mario Bergoglio, Francis I

Here are the latest inventory figures of registered (deliverable) gold in Comex approved warehouses.

I am not sure approved can really apply, given the distancing that the Comex recently instituted in the disclaimer on their inventory report.

"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only."

Perhaps we should start saying recognized, or acknowledged. Comex takes the quantity and quality and availability of gold bullion in these warehouses at 'face value' based on unaudited reports from the vault managers and releases the data 'for information purposes only.'

I will never forget the instance where Harvey Organ and son paid a visit to the Scotia Bank vault, and found so little actual bullion on the premises. Here is their audio interview from 2010.

The Scotia reports show that the backing for their gold and silver certificates had fallen to 43% at fiscal year end of 2009. This situation was corrected after being reported to officials.

While some cavalierly dismiss this incident, saying that Harvey and son 'should have known,' in fact the point was that this was a surprise to many, and it was corrected only through an accidental encounter of a customer with the reality of what the Bank had been doing.

Sometimes these accidents occurred during periods of stress, as in the case of MFGlobal. It has to do with the discrepancy between supply and apparent supply.

As a quick word, although some like to refer to the chart below as 'owners per ounce,' I think it is important to remember that the Comex is not really a physical market, and so only a small minority of contracts actually become presented for delivery.

However, the 'potential claims per ounce' of deliverable is a useful metric, especially at the extremes, in much the same way that 'days to cover' is a useful metric for short interest in stocks, keeping in mind the presumption in that figure that the price can rise without restraint. No one expects all the shorts having to cover at the same time, but the metric is a useful measure of short interest nonetheless.

And so it is with potential claims per ounce, although in this case we are looking at what is considered deliverable, rather than every ounce of bullion that could potentially exist in the world for what I would think are obvious reasons.

Why don't I just look at the eligible? Well I do, but one must keep in mind that just because bullion is called eligible does not indicate that it is for sale, not at all. It is just bullion being stored in a particular form in a particular vault. It is the registered or deliverable bullion that is available at the current price levels, which is really the point after all, isn't it?

And for those who watch the Comex for default, eligible does not work all that well, because in the case of a run on bullion, I would imagine those who have bullion in storage in one of the those acknowledged warehouses would pull their own stock out fairly quickly, as they might be permitted.

As you know, and as I must remind you, Comex could suffer a break in confidence, a de facto default, but an actual default is not likely because of the exchange's ability and possible willingness to invoke force majeure and dictate a settlement in paper money.

If some incident should provoke owners and investors to wish to take possession of their bullion, one must consider what the implications might be? How long will they have to wait to receive their property, if it will be returned at all, or in kind at some dictated settlement price.

Is this some extreme circumstance not worth considering, to be sneered at by the usual apologists? Those who think of bullion very cynically as just a trade? Don't worry, nothing to see here, move along.

There is plenty of hyperbole on both sides of these questions. I try not to add to it, but to keep going with what can be discovered, in the hope of shedding some light on the subject. And so I tend to ignore the misleading statements or insubstantial comments made by those who are merely seeking an audience. And I would urge those who are on the bullion side of things to tone it down to the facts as well, although the urge to be heard is often a strong allure.

If anything, I blame the government regulators and the exchanges for the opacity and lack of firm understanding in the markets for certain commodities. If there was clarity, the amount of speculation would be significantly reduced. But apparently they do not with to have this for whatever motive they might have.

How can one have confidence in a commodity system in which prices are set on an exchange that rarely involves actual delivery, and whose inventory levels are issued 'for information purposes only' without audits.

Given the recent experiences of those who held bullion claims with MF Global who were given a dictated settlement, and the people of the nation of Germany who will be waiting seven years for the delivery of their property, I think not.

There are always those who will say, 'no problem, nothing has broken yet. Don't be an alarmist.' And they will continue to do so until a thing finally hits the wall, and people get hurt. And then they will have walked away, no longer to be found. This is what happened at MF Global. And in the financial crisis of 2007-2008. And continues to happen today.

As always, the devil is in the details and the leverage, and what has been hidden will be revealed. Eventually.

By Jesse

Welcome to Jesse's Café Américain - These are personal observations about the economy and the markets. In plewis

roviding information, we hope this allows you to make your own decisions in an informed manner, even if it is from learning by our mistakes, which are many.

© 2013 Copyright  Jesse's Café Américain - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Jesse Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules