Convergence of outlier trends have emerged
This article first appeared on SchiffGold.
Usually I only do one Comex Countdown into the close, but… you know… a war just started. Throw on top the fact that the Comex has been flashing warning signs lately, and I think a daily update is warranted for the next 3 days. It’s very possible delivery volume is very robust which could put pressure on the physical market. I will keep the commentary light and the charts simple…
First a look at Net New Contracts (opened mid-month for immediate delivery). As shown below, incredible strength with 1,202 contracts or nearly 30% above the previous record of 931.
Figure 1: Recent like-month delivery volume
When looking at the house accounts, we can see two things.
Figure 2: House Account Activity
When compared to previous major months, open interest went from middle of the pack to front of the back. Still 2 days to go, but we could be looking at another record.
Figure 3: Open Interest Countdown
Spreads are still fairly tight, so the market hasn’t gotten out of control yet.
Figure 4: Roll Cost
Total delivery volume will end up being below average as shown below.
Figure 5: Recent like-month delivery volume
Much of this is due to cash settlements. Nearly 1,706 contracts were cash settled. This is a far deviation from the trend which has seen some months have as many as 5,000+ contracts opened mid-month for immediate delivery. As mentioned previously, large net new contracts in either direction raises interesting questions, but seeing a record number of cash-settlements certainly raises an eyebrow!
Figure 6: Cumulative Net New Contracts
This includes BofA in the market taking almost 6,000 contracts for delivery.
Figure 7: House Account Activity
We can see that March pulled back some yesterday, but is still staying way above trend.
Figure 8: Open Interest Countdown
April is also showing a big move above trend in terms of open interest as shown below.
Figure 9: Open Interest Countdown
Finally, similar to silver, the spreads on the April contract are in line.
Figure 10: Roll Cost
The market is fairly opaque, which can make it difficult to know exactly what is going on. However, the open interest data is showing some pretty big divergences from trend. With the Fed having lost control of inflation, it’s hard to believe this is all related to Russia and Ukraine, especially considering some of these divergences started to materialize prior to the conflict. Bottom line, interest in gold is picking up.
Data Source: https://www.cmegroup.com/
Data Updated: Nightly around 11PM Eastern
Last Updated: Feb 23, 2022
Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/goldsilver/