The exit from the vaults is slow, methodical, and consistent
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.
Gold has definitely found a nice consolidation zone, oscillating between $4600 and $4800. During this time, delivery volume has slowed some as seen in the chart below. March is a major delivery month for gold and delivery volumes hit the lowest level since October 2024.
Figure 1: Recent like-month delivery volume
When looked at from a dollar amount perspective (rather than raw ounces), you can see that the amount delivered is about half the amount last year despite much higher prices. Looking back over the last several years shows a much higher amount delivered.
Figure 2: Notional Deliveries
Net new contracts (contracts that open and settle for immediate delivery) were very low this month, accounting for 5614 contracts. This is typically one of the big drivers of delivery volume but was relatively low this month.
Figure 3: Cumulative Net New Contracts
While deliveries at the Comex have slowed, metal leaving the vault has not. A delivery at the CME is really just a warrant moving from one owner to another. But the physical bar of gold actually stays within the vault. So to get a better perspective on actual metal movement, you need to look at inventory levels.
As shown below, metal leaving the vault has continued unabated. What is even more interesting is that you are no longer seeing large spikes or drawdowns. The exit has become a slow steady drip indicating a very deliberate and methodical move to take metal out of Comex reserves.
Figure 4: Inventory Data
Looking ahead to the May delivery period (a minor month for gold), we see a contract that is hovering near the lower end of the average.
Figure 5: Open Interest Countdown
With the recent drop in inventory, the open interest relative to physical stocks is slightly higher and more within the normal range.
Figure 6: Open Interest Countdown Percent
Bottom line, April did not see a great exchange of warrants but it did see a continuation and acceleration of the metal leaving the Comex vaults all together.
While the gold market is showing a futures price that is getting higher above the spot rate (which caused metal to move from London to New York last year), the silver market is experiencing the opposite problem, backwardation. The spot price is above the futures price. This is actually a bigger warning sign because it highlights the pressure being put on the physical market.
Market Signal: Backwardation often signals a strong immediate demand or a supply shortage in the current spot market. The market is willing to pay a premium for the asset now, as the shortage is typically expected to resolve over the long term.
The backwardation has fluctuated in and out, but as of now, the spot price is 5 cents higher than the futures price.
Figure 7: Spot vs Futures
Silver delivery drifted down again when compared to the recent months, but is still well above 2024 levels.
Figure 8: Recent like-month delivery volume
Switching to notional values, and focusing on the month of April, produces the chart below. Last April saw roughly the same number of contracts being delivered however the rise in silver prices has created an outsized impact on the notional amount delivered.
Figure 9: Notional Deliveries
Silver net new contracts were almost entirely flat except for a big jump in the middle of the month.
Figure 10: Cumulative Net New Contracts
Similar to gold though, despite slowing delivery volume, silver continues to be drained from the vault at an alarming pace. In this case, Eligible are owned bars that are not even available for delivery, so this is people just taking metal they own and getting it out of Comex.
Figure 11: Inventory Data
Registered metal (metal available for delivery) has seen a flattening here in April. Not much inventory flowing in or out. It is imperative that Comex inventories stay high enough here to meet the delivery demand.
Figure 12: Inventory Data
As we approach May delivery, the silver contract is at the lower end of the trend, but as we have seen, it will really come down to net new contracts.
Figure 13: Open Interest Countdown
On a relative basis, the open interest is actually right in the average range due to the massive drawdown in inventories.
Figure 14: Open Interest Countdown Percent
Someone or some group of people continues to pull metal out of the vault. What has at times been massive delivery volumes and quick exits has become slower delivery volumes and a slow but very steady drop of metals exiting. Why?
Reading between the lines, if you were in methodical accumulation mode of metals, would you buy out all the contracts and stand for immediate delivery? Probably not, you would drive the price up and turn heads. But if you were steady and methodical in your approach and took a little bit out everyday little by little. You can do so without raising alarms or moving the price. That seems to be exactly what is happening here. Now that both metals have gone into a consolidation zone, a buyer or group of buyers is happy to let the metal consolidate for a few months while they continue to take ownership of physical deliveries. If they moved faster, it would create a price spike and bring momentum traders back in. However, if I want to accumulate physical, then I want to do so without moving the price or spooking anyone. And that is exactly what is happening at the Comex right now.