What is the Comex Gold Market Signaling?


by Peter Schiff, Schiff Gold:

As reported last week, Comex January turned out to be extremely strong in both gold and silver for a minor month. Most of that strength materialized after First Position. February was looking modest in gold and weak in silver, but the gold market is now showing outlier trends.

This analysis focuses on gold and silver delivery volume on the Comex. See the article What is the Comex for more detail.

The Comex results usually start with silver, but the gold data needs to be highlighted first.

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Gold: Recent Delivery Month

February gold is a major month but has started slowly with only 12.5k contracts delivered in the first two days.

Figure: 1 Recent like-month delivery volume

That being said, the open interest remaining is 7.6k as shown by the purple bar below. More than 20k stood open at First Notice which is higher than August and October, slightly below April and June, and well below December’s 31.5k (green bars below).

Figure: 2 24-month delivery and first notice

Below is a chart that shows the number of contracts delivered as a % of starting open interest in the first two days as the contract starts. This shows major months. At this point, 60% have been delivered, up from 18.3% on the first day. After the slowest start since December 2020, deliveries picked up quite a bit on day 2.

Figure: 3 Delivery Volume After First Notice

Why was such a low volume of contracts delivered on the first day? Was it that delivery started on a Friday? A similar event happened in December. It seems to be taking longer than normal to complete deliveries early in the month.

Another data point to keep an eye on is the number of contracts opening during the month for immediate delivery. The chart below shows this activity stretching back 4 years. Things have changed significantly since the start of Covid. The last two months have seen solid back-to-back strength, with each having more than 4k opened mid-month.

Figure: 4 Net New Contracts

Looking at just the major months shows that the current negative red bar above (-526) is not very indicative of things to come. A spike down to star the month has almost always been followed by steadily climbing mid-month deliveries. This has held true for all months except Dec 2020.

Figure: 5 Net New Contracts

As discussed previously, the mid-month activity the last two months was driven almost entirely by BofA House account opening and standing for delivery. They started December by delivering 11k contracts and have spent the better part of 8 weeks rebuilding that position (which is why BofA ended December down only 7.7k).

The chart below shows the House account activity over the last 3 years, singling out BofA. Once again BofA is at again for February, taking 3,7k in the first two days. BofA has now made up for its net loss in December (7,724) with the combined activity of Jan and Feb (8,627).

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