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There's No Gold" - COMEX Report Exposes Conditions Behind Physical Crunch

GOLDZILLA

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#1
https://www.zerohedge.com/markets/t...s-conditions-driving-physical-supply-problems

And in case you doubted this, the cost of an American Eagle one ounce coin at the US Mint is now $2,175...



But now we can see more details of what is behind this 'shortage' as SKWealthAcamdemy's J.Kim details, the latest COMEX Issues and Stops reports expose conditions behind the COMEX physical gold supply problems. Though I have written about the various reasons why physical gold supply problems manifest many times in the past, this topic still remains one rarely discussed by financial journalists, and never discussed by the mass financial media.

For client accounts, when bullion banks stop more notices than issued, they, will lose physical inventory.

For house accounts, the opposite is true.

When bullion banks issue more notices than stops, then they will lose physical
 

savvydon

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#2
The US Mint tacitly acknowledged the precious metal market reality when they repriced the premiums for their precious metal coins this year. They are now significantly higher than they were last year.

Additionally, the Mint jacked up the price of the 5oz silver ATB from $154.95 last year to $178.25 this year. That is quite a premium for five ounces of silver. Perhaps they have an expectation that the silver price will move up sometime during the year?
 

oldgaranddad

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#5
So who and how many defaulted for gold delivery? Wasn't there a record number of contracts waiting on delivery? Did the COMEX just wave a magic wand and make them roll over their contracts?

Can anyone in the know explain?
 

anywoundedduck

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#6
So who and how many defaulted for gold delivery? Wasn't there a record number of contracts waiting on delivery? Did the COMEX just wave a magic wand and make them roll over their contracts?

Can anyone in the know explain?
I know that there is some tomfoolery being concocted by the COMEX and the London market, where the COMEX is laying off the contracts to London and the contract is being paid off in 400 ounce bars, which has never been done before. Suspicion surrounds this newly concocted procedures, and whether London is paying these contracts off in paper, and not fulfilling any contracts for delivery at all.
 

Ragnarok

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#7
Buy optons on futures - and take delivery?
If I understand how those comtracts work, you would very likely be settled for cash against your will.

R.
 
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anywoundedduck

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#8
If I understand how those comtracts work, you would very likely be settled for cash against your will.

R.
Actually, there are large dealers that are standing for delivery, and won't settle for cash, as the gold supply evaporates worldwide.
Why do you think COMEX is laying off contracts to London?
If they could have settled for cash, they would have.
The 400 ounce bars that London may have in inventory will have to be thoroughly drilled and tested for counterfeit stock, which most assuredly will be uncovered.
Bunch of fucking Crooks.
 
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Ebie

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#10
Actually, there are large dealers that are standing for delivery, and won't settle for cash, as the gold supply evaporates worldwide.
Why do you think COMEX is laying off contracts to London?
If they could have settled for cash, they would have.
The 400 ounce bars that London may have in inventory will have to be thoroughly drilled and tested for counterfeit stock, which most assuredly will be uncovered.
Bunch of fucking Crooks.
Very interesting.
Are sure of that?
I thought that they could force anybody to take FRNs?
If true, maybe the paper price will rise??
 

ZZZZZ

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#12
IIRC in the past, they did force payment $$'s instead of gold.
If they do it again, it will blow up on them like a volcano. The jig is up, Jeeves. The emperor has no clothes. Fool me once shame on you,..

That's all the cliches I've got right now.
.
.
 

anywoundedduck

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#14
I was told that they refused to issue contracts w/out dollar clauses.
The dealers, who require physical are not signing contracts that give the CRIMEX an escape clause to settle for cash. They may settle, but then they won't be back, and if CRIMEX loses the Dealers, they will lose the gold market. Watch for BRINKS, WELLSFARGO, and other carriers to gladly step into the breech to deliver physical, once the gold moonshot is over with, and things have settled down. Will be a long time before anyone buys a gold contract anymore. I am not sure about silver, but I hear the shorts are running for the door. Something about selling the same ounce of silver over 500 times.
 

Ebie

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#15
Where is Apmex getting its ASEs, for example ("Available April 22, 2020"). "As low as $23.55" They claim to have 8999 for sale.
Who is selling them to Apmex? Is it Comex?

The dealers, who require physical are not signing contracts that give the CRIMEX an escape clause to settle for cash. They may settle, but then they won't be back, and if CRIMEX loses the Dealers, they will lose the gold market. Watch for BRINKS, WELLSFARGO, and other carriers to gladly step into the breech to deliver physical, once the gold moonshot is over with, and things have settled down. Will be a long time before anyone buys a gold contract anymore. I am not sure about silver, but I hear the shorts are running for the door. Something about selling the same ounce of silver over 500 times.
 

ZZZZZ

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#16
I was told that they refused to issue contracts w/out dollar clauses.
Who told that to you?

But anyway, the point is that if they default on physical delivery, the price of gold and silver will go to the moon (Alice).
.
.
 

Zed

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#17
I was told that they refused to issue contracts w/out dollar clauses.
Who told that to you?
There has always been that clause, they have always been able to settle any contract (not just gold) in cash.

The thing is that if they do it for no good reason then they blow the exchanges credibility and relevance and risk people moving away from it.
 

Zed

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#18
The dealers, who require physical are not signing contracts that give the CRIMEX an escape clause to settle for cash. They may settle, but then they won't be back, and if CRIMEX loses the Dealers, they will lose the gold market. Watch for BRINKS, WELLSFARGO, and other carriers to gladly step into the breech to deliver physical, once the gold moonshot is over with, and things have settled down. Will be a long time before anyone buys a gold contract anymore. I am not sure about silver, but I hear the shorts are running for the door. Something about selling the same ounce of silver over 500 times.
IF there is a option to settle for cash WITHOUT the exchange forcing the settlement in cash (they can) it would have to be at a meaningful premium in order to cover the gap to physical. IF that is occurring the market will quickly devolve into a paper chase where everyone asks for delivery in order to get the premium offered. What is more they will be back to hit that button every month that they can. So IF this is happening it WILL blow them up in the end. Either that or they have a clause that say that they cannot come back and ask for delivery in the future. That in turn will blow them up but via a different route, chasing players away from the market causing its own set of issues, especially once it becomes known... which it will.

Practically there is only one way that they can do it... declare Force majeure across all contracts and settle the lot in cash... HOWEVER this is a one time thing and probably the last thing that ever happens in Comex gold. Trust and participants will evaporate as will the gold over time. It will be a market with no stock and no trust.

Bottom line they NEED it to work, which is why they will get gold from ANYWHERE in the end to settle as best they can as they don't want to risk killing the Comex market.

That may well happen anyway, I'd not bet on it, but it is certainly possible.
 

ZZZZZ

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#19
There has always been that clause, they have always been able to settle any contract (not just gold) in cash.

The thing is that if they do it for no good reason then they blow the exchanges credibility and relevance and risk people moving away from it.
Right, they always CAN settle in cash, but as you say if they actually do it, it will blow up the exchange.
.
.
 

Ebie

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#20
"I was told that they refused to issue contracts w/out dollar clauses."
"Who told that to you?"
- - - -
A metals dealer and mining company board member.
10 years ago.
Perhaps that was only for normal citizen investors...
 

Zed

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#21
"I was told that they refused to issue contracts w/out dollar clauses."
"Who told that to you?"
- - - -
A metals dealer and mining company board member.
10 years ago.
Perhaps that was only for normal citizen investors...
Again... it has ALWAYS been that way! ALWAYS!
 

Zed

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#22
Guys...

What happens here...

Mint X buys 10,000 oz's of gold from a refiner to make product and at the exact same time they SHORT SELL 100 Comex contracts (10,000oz) to lock in the cost of the gold to them. Now they are price agnostic, it can go up or down and it doesn't matter the gold cost them zero. Then they make product and profit from the premium charged for said product.

For this to work mints MUST be able to sell short @ the price they buy for or very near. If the futures market is below the physical market by any significant margin then product will either have to carry a huge premium to cover the risk or it will not be made, restricting supply.
 

Zed

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#23
Right, they always CAN settle in cash, but as you say if they actually do it, it will blow up the exchange.
Yes, MASSIVE distress signal. Maybe COVID19 will cover that off, maybe not.
 

Strawboss

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#25
Guys...

What happens here...

Mint X buys 10,000 oz's of gold from a refiner to make product and at the exact same time they SHORT SELL 100 Comex contracts (10,000oz) to lock in the cost of the gold to them. Now they are price agnostic, it can go up or down and it doesn't matter the gold cost them zero. Then they make product and profit from the premium charged for said product.

For this to work mints MUST be able to sell short @ the price they buy for or very near. If the futures market is below the physical market by any significant margin then product will either have to carry a huge premium to cover the risk or it will not be made, restricting supply.
Futures are priced ahead of spot right now. Are you suggesting they may be priced below spot by a significant margin?
 

Zed

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#26
Futures are priced ahead of spot right now. Are you suggesting they may be priced below spot by a significant margin?
They need to be ahead of spot for physical supply to be maintained @ street level. That is normal or Contango, if they go into Backwardation it indicates a supply tightness which needs to resolve to open up supply to mints etc. Product producers have a hard time if they can't hedge properly.

Right now you'd expect it to be in Backwardation but it isn't... I don't know why that is?!
 

savvydon

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#27
Guys...

What happens here...

Mint X buys 10,000 oz's of gold from a refiner to make product and at the exact same time they SHORT SELL 100 Comex contracts (10,000oz) to lock in the cost of the gold to them. Now they are price agnostic, it can go up or down and it doesn't matter the gold cost them zero. Then they make product and profit from the premium charged for said product.

For this to work mints MUST be able to sell short @ the price they buy for or very near. If the futures market is below the physical market by any significant margin then product will either have to carry a huge premium to cover the risk or it will not be made, restricting supply.
Interesting to note that the mint just raised their premiums on gold products by a significant margin. They did it a month or two ago. What were they looking at that helped them decide to do that?
 

Unca Walt

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#28
I was told that they refused to issue contracts w/out dollar clauses.
True, dat. But they have lost that rabbit-outa-the-hat trick. No longer will biggies hold the empty bag.

IF there is a option to settle for cash WITHOUT the exchange forcing the settlement in cash (they can) it would have to be at a meaningful premium in order to cover the gap to physical. IF that is occurring the market will quickly devolve into a paper chase where everyone asks for delivery in order to get the premium offered. What is more they will be back to hit that button every month that they can. So IF this is happening it WILL blow them up in the end. Either that or they have a clause that say that they cannot come back and ask for delivery in the future. That in turn will blow them up but via a different route, chasing players away from the market causing its own set of issues, especially once it becomes known... which it will.

Practically there is only one way that they can do it... declare Force majeure across all contracts and settle the lot in cash... HOWEVER this is a one time thing and probably the last thing that ever happens in Comex gold. Trust and participants will evaporate as will the gold over time. It will be a market with no stock and no trust.

Bottom line they NEED it to work, which is why they will get gold from ANYWHERE in the end to settle as best they can as they don't want to risk killing the Comex market.

That may well happen anyway, I'd not bet on it, but it is certainly possible.
Excellent post.

If Comex handed out huge bundles of worthless degraded paper... IMO there would be a sea-change. Miners would sidestep Comex and go direct to their own customers -- because no Comex customers would go to Comex anymore.
 

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#29

Zed

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#31
Interesting to note that the mint just raised their premiums on gold products by a significant margin. They did it a month or two ago. What were they looking at that helped them decide to do that?
Probably just their cost v hedging income. The premium MUST bridge the gap and cover profit. So I'd plumb for market forces as the driver... and I guess they'd also have a good feel for retail demand @ the other end of that equation.
 
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Scorpio

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#33
yep BJ, we have been watching that here, calling out that spread between spot and futures,

the article tries to explain some possibilities of why that is,

saying almost virtually the same thing as why cb's had to jump in the markets last late summer and fall to add liquidity,

saying that banks aren't trusting counterparty risk and not covering each others 6 on gold trades
 

Aurumag

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#34
Interesting interview in which the gentleman from Switzerland details that the majority of Au refiners within his country are shut down as non-essential businesses.

 

TAEZZAR

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#35
FWIW, my LCD just called me & he is offering to buy at $40 over spot. Obviously he is out of inventory, with buyers at the door !
I'm thinking this could be the start of something big nice ! :finished::don't    know2:
 

Cigarlover

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#38
Why don't they just get it out of fort Knox?:dduck::dduck:
 

GOLDZILLA

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#40
Thats probably where they plan on putting it all when they steal it from everyone. Unfortunately several boating accidents are bound to occur over then next few weeks.