Physical demand has been keeping prices elevated
This article first appeared on SchiffGold.
The CME Comex is the Exchange where futures are traded for gold, silver, and other commodities. The CME also allows futures buyers to turn their contracts into physical metal through delivery. You can find more detail on the CME here (e.g., vault types, major/minor months, delivery explanation, historical data, etc.).
The data below looks at contract delivery where the ownership of physical metal changes hands within CME vaults. It also shows data that details the movement of metal in and out of CME vaults. It is very possible that if there is a run on the dollar, and a flight into gold, this is the data that will show early warning signs.
December will be an interesting month. If we see elevated delivery volume it will likely indicate that the metals have not lost steam after the election. This would confirm that the election sell-off is mostly behind us and the physical demand for both metals remains strong. If we see weak delivery demand for December it may give investors reason for concern.
The current open interest shows that we could see a strong month. We will know more in a few days.
November saw very minor delivery volume in gold, coming in at 2,723 ounces delivered. This is not surprising; November is a very quiet month typically since December is a major month in both metals.
Figure 1: Recent like-month delivery volume
Despite a quiet month, there was a jump in net new contracts. The surge actually occurred right after the election while the price of gold was falling through the floor.
Figure 2: Cumulative Net New Contracts
Gold inventory levels remain very low sitting around half the levels from 2022.
Figure 3: Inventory Data
The real fireworks could come in December. December is a major delivery month and the price of gold is up huge on the year. Furthermore, we have seen a very quick rebound after the election sell-off suggesting that this is still a strong market. Open interest for gold is higher than any major month over the last 18 months. It will continue dropping but if the trend holds it could see very large delivery volume.
Figure 4: Open Interest Countdown
On a relative basis, open interest is also very elevated.
Figure 5: Open Interest Countdown Percent
Silver delivery volume was modest in November, currently sitting around average for minor months.
Figure 6: Recent like-month delivery volume
We did not see a surge in net new contracts like we saw in gold.
Figure 7: Cumulative Net New Contracts
Registered and Eligible have been plotted separately to make the charts more readable. Eligible saw a pop early in the month, but it was immediately reversed.
Figure 8: Inventory Data
Registered got extremely low in 2023 but was able to recover this year. We are now seeing a drop in inventory. There have been some dips along the way up over the last year, but they have all reversed and inventory levels continued moving up. This current dip is not seeing the same recovery which begs the question if available inventory levels are low to replenish Comex supplies.
Figure 9: Inventory Data
As we approach the delivery period for December, silver is showing a similar position to gold where it is elevated above trend.
Figure 10: Open Interest Countdown
On a relative basis, open interest is actually quite low, primarily because of the recovery in Registered over the last year.
Figure 11: Open Interest Countdown Percent
December will be a good indicator on where this market is going next.