Jesse’s Cafe Americain – Gold, Comex and the Exchange for Physical:
Some months ago a chap described changes in the comex rules for futures contract deliveries. Therein it was described that the EFP, exchange for physical, rules were amended to allow for delivery of GLD shares in lieu of bullion.
Well take a look at something new, at least for me, in Monday’s comex preliminary volume and open interest report. On page 3 of the attachment, notice that in addition to futures contracts listed under the EFP category, a new category is listed: “Delivery Cash Settled” = 2866 december gold contracts. Just so happens 2866 was exactly the number of delivery notices issued on FND as reported in the Nov 27 vol and op int report.
Conclusion: guess you can no longer get bullion via using comex contracts. This apparently is the next step in the evolution of gold trading.
Previous signs of constricted gold supply:
- U.S. Mint suspends Gold Eagle coin sales due to lack of gold blanks
- Gold hits another all time nominal high of $1,059 Oct. 7
- More signs of constricted supply in physical gold
Check that last link. It was in July – just five months ago – that Comex first failed to deliver physical gold to settle a gold futures contract. Instead, shares of the GLD ETF were used for settlement. Now Comex seems to be delivering little to no gold, using cash and ETFs instead. If a commodities trading market can’t deliver actual commodities then it’s just a gambling parlor with no connection to real world commodities that you can reach out and touch.
If this keeps up the value of physical metal – as opposed to paper promises of gold – could skyrocket. More on the difference between paper and physical markets here (second one happens to be a repeat of the above):
- Physical oil vs. paper oil markets
- More signs of constricted supply in physical gold
- Word of the Day: John Exter’s Inverted Pyramid of Assets
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