The Comex Is Facing A Gold Crisis

Sure, you can’t eat a bar of gold and it just sits in storage like a Pet Rock that’s been cast aside by its bored owner.  But try selling the Indians or Chinese a paper gold bar and see how far you get.  You might end up with a knife in your forehead.

The stench has been growing stronger by the day.  Many of us have been writing for years about the extreme imbalance between the paper futures open interest vs. the underlying amount of gold being reported as available for delivery.   The latest disclosure from the CME is that the ratio of paper gold vs. the amount of deliverable ounces has spiked to over 200:1.

As of last Friday, JP Morgan had 89.4k ounces withdrawn from the  “customer”/ eligible account in its vault and it moved 122k ounces of gold from its “deliverable”/ registered account into its customer account.  What the true nature of those transactions were – i.e. who the counterparties were and did in fact any real gold actually leave JP Morgan’s gold vault – is anyone’s guess due the intentional opacity of disclosure on the Comex.

But the bottom line is that, as of last Friday, the Comex vaults collectively now show 202k ounces of gold in the “registered” / deliverable accounts of the Comex vault custodians.  As of today’s trading, the “preliminary” gold futures open interest rose to 419k contracts representing 41.9 million ounces of paper gold.  This would, preliminarily, put the ratio of paper gold to deliverable physical gold at an astonishing 207:1 ratio.

The amount of “deliverable” gold on the Comex is the lowest that I’ve seen it in the time I’ve been following the Comex data avidly since 2002.  Please note that the preliminary open interest is almost always revised, most typically a bit lower, by the time the Final report is issued the next day.  But based on many years of tracking this data, it is likely that any revision will not move the “needle” on that 207:1 ratio by much in either direction.

Nothwithstanding all the other information contained in this disclosure, this number represents the confirmation that the Comex is nothing more than a pure paper gold market.  It’s nearly 100% derivatives.  It’s the imposition of derivatives by the Fed and the U.S. Treasury – via their agent bullion banks – on the gold market in order to control the pricing discovery mechanism.

In other words, the Comex gold market is now a 100% artificial gold market.

I find it it quite interesting that the elitists overseeing this operation on the Comex are willing to advertise the 200:1 paper:gold ratio when they have the means at their disposal to hide that number or to make it look a lot smaller.

There’s some kind of message they’re sending to anyone who cares about this sort of thing. It’s either “f*ck you” we’re in control” or “help, we’re in trouble on our paper gold short position.”  Or a combination of both.

The implications embedded in all three of those possibilities are quite horrifying to contemplate.

It’s quite obvious that there’s a problem with the supply of physical gold that is readily available for delivery.  The same is true of the retail silver market, in which available supply at the retail level shrinks by the day.  Premiums on a simple roll of 20 silver eagles are now over $5 at big coin dealers claiming to have inventory.  Most dealers have been wiped out of most if not all of their entire inventory of silver SKU’s.

In my opinion, that head-splitting 200:1 ratio of paper to deliverable gold on the Comex is the surest sign that the market for gold and silver is in crisis mode. The term “crisis” also describes the state of condition of the U.S. stock market and, ultimately, the entire current U.S. financial and economic system.

14 thoughts on “The Comex Is Facing A Gold Crisis

  1. Winner Dave, Saw Jesse’s 200:1 line on this and thought you might opine….IMO its the F/U and the OMG moment and the Banksters are in the headlights. Still looking for a tipping point that they can’t reverse but sure feels closer. Surely they if they aren’t total sociopaths (that’s debatable) would now be questioning there gold bondage strategy. Once again there misplaced CONfidence in their ability to fix it is shit……Their
    tunnel vision a black hole of despair. May they ROT IN HELL!

  2. @KansasCrud – we, the masses, control whether or not the banksters “Rot In Hell”. Their time of judgement cometh soon…….

  3. COMEX’s message is clear: the paper:gold ratio is 200:1 but it can easily go to 1000:1 and we don’t give a damn shit!

      1. I was going to comment that the numbers were way off, according to many guests Eric King has interviewed as well as guys such as Rob Kirby and Jim Willie. Some people are not going to feel too well when China and Russia finally announce how much they have of both metals and pull a “we showed you ours, now show us yours”…

  4. Dave,

    In the 2nd to last paragraph you say “Most dealers have been wiped out of most if not all of their entire inventory of silver SKU’s”.

    Pardon my ignorance but what are “SKU’s” ?

  5. Mining exec Hambro tells Bloomberg that ‘paper gold’ isn’t real metal

    Mining entrepreneur Peter Hambro, founder and chairman of the Russian mining firm Petropavlovsk, today explained to a couple of Bloomberg Television journalists the difference between “paper gold” and real metal in hand. The former, Hambro noted, carries serious counterparty risk. Hambro also noted that central banking has turned into the propaganda business, the business of “managing expectations.”

    The interview with Hambro is a little less than 5 minutes long and can be viewed at the Bloomberg News Internet site here:

    http://www.bloomberg.com/news/videos/2015-09-09/is-gold-still-a-safe-hav

    http://www.gata.org/node/15715

  6. Trading in Gold is broken: Market forces of supply and demand have been perverted by the paper trader. Trading or purchasing commodities that dose not exist is ludicrous.
    Talk about market manipulation. What’s the point of holding Gold if its value can be manipulated so easily, it will never rise in value until required delivery is the real thing.
    This is like the same thing the Fed is doing with QE, creating money out of thin air.

  7. They can settle these contracts in cash. The ratio could go to 10,000:1 and it really wouldn’t squeeze the actual price of gold.

  8. The only time a person in China would buy a paper gold bar would be to burn it in order to send it to their deceased ancestors.

    Sounds strange? Well, it is a part of their culture to burn replicas of real things so their ancestors can have nice things in the hereafter.

    The web link is here-
    http://autumnfloods.com/2013/04/07/the-history-and-idea-behind-chinese-paper-offerings-and-the-variety-of-paper-goodies/

    So The Chinese, even in the hereafter, want gold and silver, lets see the banksters try to discourage That demand!

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