Comex Countdown: Will Gold Lead Silver Higher?


by Peter Schiff, Schiff Gold:

This analysis focuses on gold and silver physical delivery on the Comex as we move from September into October. See the article What is the Comex for more detail.

Silver: Recent Delivery Month

Silver has nearly completed the major delivery month of September. As can be seen below, the amount delivered is below recent months at 5,377 contracts. Currently, there are 294 contracts open, but this will not be enough to even get above the July amount of 6,692.


Figure: 1 Recent like-month delivery volume

Looking at the mid-month activity also shows middling results. The red bar below indicates how many contracts were open and delivered in the same month. September had 143 open and close mid-month, which is below even the minor month of August which saw 184 such contracts. Perhaps the “silver” lining is that the activity of July did not repeat where Open Interest collapsed into the close followed by over 1,000 contracts cash settling intra-month (rather than standing for physical delivery). Still, though, the total July number was higher than September by over 1,000 contracts.

Figure: 2 24 month delivery and first notice

While this is a concerning trend showing less demand for physical delivery among contract holders, it’s still important to track the physical movement of metal. In recent weeks, silver has been leaving the Comex vaults at a pretty fast pace.

Looking historically at the month of September shows that this month is underwhelming especially given the higher price of silver relative to recent years. The chart below shows the notional amount of delivery in previous Septembers.

Figure: 3 Notional Deliveries

Silver: Next Delivery Month

The October contract is about a week away from First Notice. The trend is again, unfortunately negative. After starting strong, the open interest has been slowly declining into the close coming up next week. Where the most recent contracts have accelerated into the contract close, October is showing a weak finish.

With the recent price decline in silver, the waning interest in physical metal is not completely surprising. However, once the Fed fails to deliver on its taper and interest rate hikes, it’s hard to believe this trend will not reverse quickly and rather sharply.

Figure: 4 Open Interest Countdown

The minor months have been dropping since the high reached in April. With only 1617 contracts outstanding, it’s hard to imagine this trend will break in October.

Figure: 5 Historical Deliveries

Gold: Recent Delivery Month

The charts below follow the same order as the silver charts above.

September gold is a minor delivery month and has diverged from silver, showing resilience. The last three months have shown an accelerating trend with September hitting 2,859 contracts.

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