Thanks but I don't know what data proves that contracts are not going to delivery.
The front month for delivery is currently September. Current month delivery information is here
. From that report, the columns to pay attention to are "DAILY TOTAL" and "CUMULATIVE" for the respective date. The former shows how many deliveries were made that day and the latter shows how many total for the month. As an example. as of 09/22/2011 there was 1 gold contract delivery made which brings the total contracts fulfilled so far this month to 2,821. This is normally a month that only sees a few hundred
contracts standing for delivery, not thousands
. All numbers from the current reporting day pertain to the prior trading day, so numbers from 09/23/2011 are for 09/22/2011 activity.
On the COMEX Volume and Open Interest Report page
, generate a report for the appropriate day and desired item (in this case "Asset Class/Totals: Metal" and "Product Name: Gold"). The information will be present under the "OPEN INTEREST" column. For 09/22/2011, gold futures open interest is "73 - 50" which means the present OI is 73, down 50 from the prior trading day's reading of 123 contracts outstanding.
Now we know that, on 09/22/2011: 1 contract was delivered and the total open interest fell by 50 contracts. This leaves 49 contracts disappearing into the ether with 73 still to be delivered and only a week remaining to do so on what should be a negligible amount, so why the delay? Since the full amount must be paid on the delivery notification day in order to request delivery, there is no margin involved here. Therefore, the most reasonable assumption is that these contracts were settled privately, most likely for cash instead of the physical metal.
Since the requesting party wanted physical metal, it is also reasonable to expect that a sizable premium is being paid for the receiving party to accept cash in lieu of metal. How much, we don't know - it could be 5% or 50% above and beyond the agreed-upon contract price. In other words: a gold contract for $1,800 being $118,000 (100oz per contract), if the premium paid for the recipient to accept cash instead of metal were 5% the amount paid would be $123,900. This is irrespective of current prices and wholly dependent on availability of whatever product the contract is for, again in this case gold.
Only the banks and the recipient of payment know how much the premium is and there hasn't been any information I've found regarding that. If the premium on $1,800 contracts is 5%, the effective price of gold would be $1,890 and for 50% premium - $2,700/oz. As mentioned, Harvey Organ
does this daily so you don't have to, but understanding how this information is obtained does help a lot.
Another piece of information that may or may not be entirely forthcoming, but is still very telling, is the warehouse stocks report
. The eligible numbers are owned by a third-party and being stored at COMEX warehouses. The registered numbers show the amount of metal available for delivery. Thus registered is the important value, especially when considering that Thursday's raid only brought the October open interest down 728 to 29,569 contracts from just over 30,000. I'll convert the contract values to ounces in the data below.
|Current COMEX warehouse stocks of registered gold:||1,930,640 oz|
|Current October contract open interest in ounces:||2,956,900 oz|
Translating in reverse, the amount of available gold can only supply 19,300 contracts. As you can see, demand is far greater than supply. Now consider the OI of 307,786 for the December contract, which hasn't budged much at all even with the massive raids. There is no way
that the COMEX can supply 30,000,000+ ounces of gold without truly drastic measures, such as raiding the GLD trust.Silver is even worse
|COMEX registered silver:||31,041,080 oz|
|December contract OI:||361,275,000 oz|
Failed delivery means a bank run ensues among the highest echelons of the financial world. That leads to a complete collapse of the global economy with the greatest impact on those nations most heavily tied to western banking institutions. The games being played to put this off are saving all of us by providing some time to acquire the assets which will provide means to be self-sufficient and/or escape the regions which will be hardest hit (expatriation).
Price information alone is not enough
Also I should say silver is rife with manipulation. I read the premiums over spot have increased around many silver dealers after this crash in the exchange's spot price. I bet it will get really hard to buy significant amounts of physical silver at these low prices unless those premiums are significantly large.
All markets are being manipulated now. That doesn't change reality. As mentioned earlier, pushing down monetary metal prices (gold & silver) has created an undercurrent of demand that will eradicate physical supply
. The result is that paper markets become nothing more than fiat trading houses because there is no way to supply the amount of physical metal demanded. Everyone will be throwing in greater amounts of cash while competing for a dwindling share of real assets.
Once again: if the paper/physical link is broken, ALL
market control is lost and gold will rise on a daily basis with no pauses as we have seen so far. There will be no corrections, no slow-downs, no reasonable entry points. The banks and governments are playing an incredibly dangerous game, for if they fail, the consequences will be immensely destructive. Not just to the markets, but to peoples' lives - many will die should the financial system freeze up.
I do not believe that will happen this time around. The people manipulating the system certainly aren't stupid. Gaming the system is just like fishing - you don't want your quarry to swim off because of a broken line, so you give some slack to tire it out. The problem is that banks and governments might be professional, commercial-level fishing operations, but the beast they're hunting is many times larger than their own vessel. If they don't let the line out soon, it will either break or everyone on-board will be dragged under.
I'm more concerned about gold rising rapidly than I am of the value falling into the abyss, mostly because the latter is an impossibility at this point. Official numbers might obscure the truth for now, but that will only last for so long. Short term success will be met with long-term reversal.
For the final point, I defer to Jim Sinclair: Market Violence Will Create Large Bear Trap