JP Morgan restocks supplies
This article first appeared on SchiffGold.
In the latest Comex update, I mentioned that:
Gold has started a bit slow. This shouldn’t be a surprise though as the game in gold continues to be net new contracts.
As the chart below shows, total delivery volume remains a bit below trend. However, the delivery month just got started.
Figure 1: Recent like-month delivery volume
It’s important to take a look at net new contracts. Net new contracts are contracts that open after the delivery month begins and stand for immediate delivery. They can be seen by the red bars below. Net new contracts suggest strong and immediate demand for physical metal.
Figure 2: 24-month delivery and first notice
What’s important to note about this month, is not the total volume, but the current trajectory. Net new contracts occur throughout the delivery month, and in this month, they have absolutely exploded higher to start the delivery period. In 5 days, the Comex has seen 4,190 contracts open and stand for immediate delivery. As the chart below shows, this is the strongest start to a month going back at least 2 years, which includes the start of the war in Ukraine and the February 2021 Reddit silver squeeze.
Figure 3: Cumulative Net New Contracts
Some, but not all this activity is being driven by BofA which has had delivery of 1,997 contracts.
Figure 4: House Account Activity
In the meantime, JP Morgan has been scrambling to restock their vaults after using a ton of their inventory to backstop gold during the last delivery window (JP Morgan is responsible for the big moves from Eligible to Registered below and also the efforts to add to Eligible).
Figure 5: Recent Monthly Stock Change
It’s too early to really get focused on the June contract, other than to mention it is above trend so far.
Figure 6: Open Interest Countdown
This is especially true on a relative basis.
Figure 7: Countdown Percent
No big silver update today, as things are mostly quiet. Delivery volume remains quite suppressed (see chart below) with net new contracts slightly negative (not shown).
Figure 8: Recent like-month delivery volume
The two charts to highlight are the house account activity, where the house accounts seem to be delivering out metal only and not restocking.
Figure 9: House Account Activity
Second, and more importantly, is the continued drainage of metal from vaults in silver. As shown below, some metal moved from Eligible to Registered to support the delivery month, but then that metal is being immediately and entirely removed from the vaults. This is occurring even on very light delivery volume.
Figure 10: Recent Monthly Stock Change
One final thing to note is that June is a major delivery month in Palladium. I have speculated for some time that something could break in Platinum or Palladium first given the very light supply. This sort of happened in Platinum in January, but then the Comex took measures to make sure it did not happen again in April.
Palladium delivery volume has been falling.
Figure 11: Palladium Delivery Volume
But supplies remain quite tight.
Figure 12: Palladium Inventory
The open interest for June is well above trend, but a lot can happen between now and the end of May. This is something to keep an eye on as open interest was abruptly pushed lower in March after things were looking like delivery requests would overwhelm supply.
Figure 13: Open Interest Countdown
I usually wait to analyze the Comex delivery activity until later in the month after more data comes in. However, the action in gold was hard to ignore, especially given its recent approach to new all-time highs.
JP Morgan having to defend the metal last month, combined with the very strong demand for net new contracts suggests more pressure building in the physical market. This pressure should not be ignored.
Even with the strong job numbers and a negative move in gold, the price action seems very strong. It seems like after a pause, another approach at all-time highs could be close.
The jobs number this morning was weaker than expected and could send gold to new all-time highs in the near future. Once this train gets moving and gets through the resistance zone, it could be a big break up! Get on board before it leaves the station!
Figure 14: Annual Deliveries
Data Source: https://www.cmegroup.com/
Data Updated: Nightly around 11PM Eastern
Last Updated: May 04, 2023
Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/goldsilver/