COMEX deliveries and registered gold (silver too)

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I have been reading Harvey Organ's blog for a good while now and have been amazed at the delivery notices that are being executed lately - especially for gold.

However, I don't understand how the delivery notices are being fulfulled because there is almost no movement of bullion from (or to for that matter) the "registered" account.

Can anyone out there explain how this is supposed to work?
The COMEX has been settling many large requests for delivery by paying MASSIVE cash premiums.

They don't have the metal to satisfy a lot of delivery demand - they've been paying out in cash, often in EXTREMELY large payments that HUGELY outweight the current spot price of the metal being called upon.

That scheme will only last so long.

I have been reading Harvey Organ's blog for a good while now and have been amazed at the delivery notices that are being executed lately - especially for gold.

However, I don't understand how the delivery notices are bing fulfulled because there is almost no movement of bullion from (or to for that matter) the "registered" account.

Can anyone out there explain how this is supposed to work?
Harvey usually attributes any shortfall in the difference between open interest (OI) and deliveries as being contracts that were settled for cash.

Ie. if the OI fell by 25 contacts and there were only 15 deliveries, 10 contacts were settled for cash.

But what's been happening lately - with gold at least - is the opposite. Deliveries have been exceeding any changes in OI. That indicates that there are no cash settlements and in fact more contracts are seeing redemptions as the month goes on.

I read JS Kim's analysis indicating that contracts were being settled for paper swaps in the form of EFP (Exchange of Futures for Physical) and EFS (Exchange of Futures for Swaps), but it's still not clear to me if he is referring to the contracts that Harvey says are cash settled, or if he means that the contracts the COMEX identifies as deliveries are essentially receiving ETF shares.

You'd think if it were the latter that we might see more redemptions of bullion out of the ETF (GLD) vaults.
I found this with a little bit of digging:
We talk of longs and shorts but when it comes to the current front month contract we should talk of buyers and sellers because at that point there must be a delivery process instigated. The current front month contract is SEP. Anybody who held contracts long going into what is known as "First Notice Day" (August 31 for SEP) is now OBLIGATED to take delivery and anybody holding contracts short is OBLIGATED to make delivery to the longs. (There can always be agreements to settle in cash but only if both parties agree but the obligation is for delivery). If you don't want to take delivery or you don't want to make delivery you have to roll or sell or cover your position BEFORE First Notice day.

The process is that if you are still holding a long contract on First Notice day you are "standing for delivery". You have to pay in full for your contract to your broker. The sellers (the shorts) must now issue "delivery notices" to inform the buyers that they will deliver bullion to them. Let's take SEP. On first notice day there were 3,002 contracts long and the same number short. But those holding the longs don't know who the holders of the 3002 short contracts are. So the delivery notice process is to match up the buyers with the sellers. Let's say you are holding 100 contracts. You need some one to tell you where your silver is going to come from. So the sellers of the 3,002 contracts have to issue a delivery notice to the clearing house to let them know they are a seller and they are ready to hand over the appropriate amount of silver. The sellers have 30 days to issue these notices. In theory the holders of 3,002 should ALL have received a delivery notice by the end of the 30 day notice period (Last Notice Day). These are assigned by the clearing house to the longs who are said to have "stopped" the notice while the seller has "issued" the notice. The delivery notice is sent by the clearing house to your broker. The clearing house assigns them in proportion to the holding. Once you have the delivery notice your broker will then transfer the money you have paid in full for your contract to the account of the seller at his broker. Now that he has confirmed his readiness to deliver and the money has been transferred you will then receive a "Warehouse receipt" with specific bar numbers and weights and with that you can collect your metal and take it away from the designated Comex depository. You can not take delivery with a "delivery notice" you have to pay the money and get the warehouse receipt.

Until the warehouse receipt has been issued the silver storage and insurance is paid by the seller. So they should want to start the process as soon as possible and issue delivery notices on the first notice day. Delaying issuing delivery notices indicates that the sellers don't have metal in the "registered inventory" of the Comex. If a delivery notice is issued and money is transferred the Warehouse receipt MUST be issued but if the seller doesn't have registered metal he can not enter specific weights and serial numbers on the warehouse receipt because he doesn't have any warehouse metal. So the seller delays issuing the delivery notice (which he can do because he has 30 days to issue). He then has to find some metal to put on the exchange or see if he can lease metal from an investor who has metal on the exchange or see if he can offer cash to buy a delivery notice from a long who has already received one. So a "dearth of delivery notices" means that the sellers don't have the bullion available because if they did the notices would be instantly issued on First Notice day. For example if we had seen 2600 delivery notices issued on first notice day this would have been bearish because it would mean there is plenty of bullion to meet deliveries and a large proportion is being offloaded to the buyers at the first opportunity.

Taken to the limit, if the seller FAILS to issue a delivery notice by last notice day then that is a "default". The seller is obligated to deliver and he has failed in his obligation to start the transfer of metal from him to a buyer.

It doesn't mean we will see a default this month but it suggests that the sellers are in trouble and scrambling for supply as signaled by the reluctance to issue delivery notices and the price action.

Adrian Douglas

So it appears that the delivery notices that are being reported should indeed have a direct relationship to movements in and out of the COMEX registered/dealer inventory. Very strange that there is almost zero reported movements of physical metal in this category in spite of numerous delivery notices being reported.
@ Seraphim above

I have read vague things about COMEX settling PM trades with CASH at very high premiums (Jim Willie CB, one of the most growlingest bears around), but NO ONE has shown any evidence of that.

IS there anything real about big CASH premiums vs. taking the physical? It seems kind of hard for me to believe that. Someone receiving such money, "free", could then go out and roll it over and over. Or take the premium and BUY some physical metal.

This might be a good question for FOFOA...
I think they are doing exactly that.
Rolling the cash prems over into new contracts.
I have heard reports of 25% cash prems being paid, for customers to NOT take delivery of product.(because COMEX doesn't have it).
Great way to make out like a bandit.
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If I had the steam, I would be doing the 25% per delivery month roll myself. I find it hard to believe there would not be some sort of "cant buy back in for six months" caveat on a deal like that. Either they're paying a premium in cash, or giving the premium in extra shares of SLV. Sooner or later, this strategy is going to fail.
Last night, Harvey posed the question:
With no activity at the gold comex can someone at the CFTC explain how contracts are settled?

It's the same question I posed to Harvey back in October.

I sent the following email to CFTC Commissioner Bart Chilton just now:
Dear Commissioner Chilton,

I have been following your efforts to expose manipulation issues in the silver futures markets for some time. I thank you for same.

I have also been a regular reader of Mr. Harvey Organ's blog wherein he reports on delivery notices and inventory movements of gold and silver from COMEX dealer vaults. Last night, he posed the following question:

"With no activity at the gold comex can someone at the CFTC explain how contracts are settled?"

Actually, this is an issue that I had raised with Mr. Organ over a month ago when I noticed that he had been reporting a steady stream of delivery notices, but there had not been any movement of gold or silver into or out of the registered category for all of September and October:

I can only think of two possible explanations:

1. I am wrong in understanding that delivery notices require fulfillment with metal.

2. The COMEX reporting of inventory movements into and out of the dealer vaults (registered categories) is completely FUBARed.

Any sunshine you or your office could bring to this issue would be greatly appreciated.

It´s highly improbable that it were all cash settlements.
This only would make sense if a paper gold etf like GLD redeemed shares.
The whole inventory data is very suspicious anyway :doodoo:
Harvey Organ said:
I think on Monday we will have a "bank run" on GLD as everybody vacates this fraudulent vehicle for safer funds like Sprott and Central Fund of Canada.

I know that many of you are questioning how on earth the gold and silver are settling at the comex without any metal arriving at the dealer's doorsteps. I have been writing the CFTC and the SEC for quite some time explaining that the only way that I see settling occurring was through the GLD and SLV paper and that multiple owners have claims on the same asset. The holders of gold and silver at registered comex vaults may have only unsecured paper claims on that same bar of gold that HSBC claims is theirs as well as the trustee of bankruptcy James Giddens and Mr Fane and.....

now you see the problem.

Bring on the gold rush. Dump it all I say. That just allows us silver bugs pick up more discount metal. MF Global fucked it all up for the banksters, and now, if the MF clients are not made 100% whole, and given some additional punitive recovery, the paper markets will all go the way of the dinosaur.

That my friends, is when gold and silver find their true price. If the only gold and silver to be had is physiccal, the price will simply adjust to represent true demand. Good times!
Hedge fund manager Kyle Bass talking about the fractional reserve regime of the COMEX, starting at 41:50
Probably the same going on with gold, silver and platinum. I just saw at ( that someone says that COMEX is down to approx. 80 tonnes physical, about one month's worth, so cash settlement coming soon... And probably right after I post, someone will have this story up, right here at pmbug!

We finally received inventory movements in both gold and silver around 8 pm est. Gold had no deposits of any kind only one withdrawal by the customer at HSBC to the tune of 3504 oz. There were no adjustments. However the registered inventory fell to 2.539 million oz over the holidays and I have no entry for this. This new total now represents 78.90 tonnes of gold.

Between this magical loss of ~360,000 ozt of gold and the magical appearance of 1.2MM ozt of silver a couple of days ago, it seems pretty clear that COMEX vault info isn't worth the (electronic) paper it's printed on.
Thanks for posting the Kyle Bass video. I have sent it to everyone with half a brain in my address book. Lets hope someone watches it.
Eventually, this fractional reserve + fraudulent accounting scam will blow up in the faces of the bullion banks :popcorn:
The ETF (GLD, SLV) holders will get killed as well.

I wonder if someone at GATA has an interest in taking the CME to court over their accounting. Might be worth a suggestion to them.
If you hold gold/silver futures, you might be able to file a lawsuit demand an independent audit. I haven´t researched it, but it might be worth to think about that.
Kyle Bass talks about his independent audit in the video posted above, seems like he had to fight over his right to get an audit aswell.
An anonymous author ("Fred") posted a comment in Harvey Organ's blog answering my question on the delivery process:
to pmbug--

Metal moved into a COMEX approved warehouse initially enters as "eligible" to be used for contract settlement. That's the term COMEX uses. Why Harvey uses "dealer" and "customer" is beyond me. If the holder of the metal sells it to a miner or industrial user or investor directly, there is no need for it to be assigned a COMEX warehouse receipt number and the metal can just sit in the account of the owner for as long as desired.

Once metal is "registered", that means it has been assigned a receipt number and that receipt can be delivered against a COMEX contract.

"Delivery" of a COMEX contract entails nothing more than the moving of a receipt from one account to another. It DOES NOT mean metal leaving the warehouse unless the holder of the receipt wants to withdraw metal. Withdrawl of metal is not part of the COMEX delivery process. It's a separate transaction between the owner of the metal and the depository.

So warehouse movements and delivery notices are much less connected than Harvey would have you believe.
What a fucked up, convoluted process. Why the hell don't they just say it that way in the first damn place??
From the comments on last night's post
pmbug said:

Thank you for your comment to my question in yesterday's post.

If I understood you correctly, it would seem that the COMEX should be moving metal from ELIGIBLE to REGISTERED to satisfy new delivery receipts. Is this correct?

Fred said:
To pmbug--

Metal needs to move from "eligible" to "registered" only if there are not enough existing receipts to take care of those who want to take delivery of receipts or if the holder of the "eligible" metal wants to deliver it against a COMEX contract rather than selling it to a dealer.

Movement of metal in and out of vaults is not nearly as correlated to contract deliveries as Harvey would have you believe.

pmbug said:
@Fred - Thanks for answering my follow up question. I'm too lazy to go back and look up the inventory of the registered vaults at the time, but I know there were several months back in 2011 (September-October at a minimum) where there were zero (ie. none) movements into or out of the registered category while several tons of metal supposedly stood for delivery. I have wondered about it ever since.

Fred said:
To pmbug--

That's certainly possible. There were enough receipts in existence and enough sellers of those receipts that more metal was not needed. Old buyers selling to new buyers.
COMEX registered gold inventory is down to levels not seen since late 2011 at 2.29 moz. Another confirmation that there is ultra strong demand for physical! :gold:


It has broken below the long term trend line at 2.4 moz which can be seen here in this interactive chart: WAREHOUSES REGISTERED&etfcodecom=GOLD

The picture for silver is entirely different. Registered inventory is at 40.4 moz, nowhere near any lows. However, any COMEX data should be taken with a grain of salt:

Longterm interactive chart for silver inventories: WAREHOUSES REGISTERED&etfcodecom=SILVER

Looks like the inventory downdrift stopped after May 2011...
Haha.. May 2011 will live in infamy.
There is still a bit of time for these numbers to change, but ...

... the CME reported another 99 gold delivery notices filed equal to 9900 oz , the number of gold ounces standing for delivery rose by 97 contract or 9700 oz and thus 13.22 tonnes of gold are standing for March delivery. No doubt this is a record for gold deliveries in the off delivery (non active) delivery month.
The total silver open interest rose by 1988 contracts from 150,924 up to 152,912. The OI for the entire complex remains highly elevated. The active front month of March saw it's OI rise by 22 contracts from 399 up to 421. We had 92 delivery notices filed on Friday so in essence we gained 114 contracts or 570,000 oz of additional silver oz will stand for the March delivery.
Comex Gold Inventories Collapse By Largest Amount Ever On Record

April 9, 2013 | By Tekoa Da Silva

A stunning piece of information was brought to my attention yesterday. Amid all the mainstream talk of the end of the gold bull market (and the end of the gold mining industry), something has been discretely happening behind the scenes.

Over the last 90 days without any announcement, stocks of gold held at Comex warehouses plunged by the largest figure ever on record during a single quarter since eligible record keeping began in 2001 (roughly the beginning of the bull market). See chart below.


Total drainage of physical inventories reached nearly 2 million oz.’s of gold, which at today’s prices represent roughly $3,000,000,000 dollars.

According to chart sage Nick Laird, this data indicates that, “Eligible stocks which are owned in LBMA/Comex good delivery form are being drawn down—which means they are being removed from the warehouses. As to how and why they are [being] removed, that is a mystery. [Up until now], eligible stocks were on the continual increase throughout the bull market. Now that trend has changed.”

What is most interesting in reviewing this chart data, is seeing where the largest drops have occurred. The largest inventory drainage is being reported from JP Morgan Chase & Scotia Mocatta warehouses. See charts below.


JP Morgan Chase’s reported gold stockpile dropped by over 1.2 million oz.’s, or rather, a staggering $1.8 billion dollars worth of physical gold was removed from it’s vaults during the last 120 days.


Scotia Mocatta’s gold stockpile removals were nominal in size when compared to JPM’s, but registered in at over 650k oz’s of gold, or over $1 billion dollars worth of physical gold was removed from its vaults over the last 90 days.

In further conversation with Nick on the implications of this chart data, he commented that, “The owners have taken [their gold] offsite, and it’s no longer stored in Comex warehouses…Has the bull market ended? Are people taking their gold out of Comex storage [because] of lack of trust? It’s a mystery, [but] I think it’s more the majority of long term holders are taking their gold elsewhere…because they no longer want to store at Comex.”

Bottom line: While mainstream voices question whether or not gold is still in a bull market, smart money appears to be questioning something else. They appear to be asking themselves, “Do we want to continue storing our physical metal within the Comex system? How can we best whisk it away from fraud, theft, or bankruptcy (including our own)?”

The timing of this trend change is also quite shocking, as it’s happening during a time in which public sentiment towards the metals are at their worse levels in years.

The boy who cried wolf has certainly cried many times over the years with regard to the Comex, but if there was ever a time to be concerned of a major market event or default—now might be it.

Enjoy the article? Please support the site by sharing this URL page link with friends, family, and your favorite chat forum.

Tekoa Da Silva
Bull Market Thinking

Meanwhile Tekoa da Silva's website has been under DDoS attack all day...
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The Site Has Been Repeatedly Crashing Today, Please Pardon The Interruptions

April 9, 2013 | By Tekoa Da Silva

Beginning this afternoon following release of the Comex Inventory piece, Bull Market Thinking began crashing repeatedly. I do not know why, but it is continuing to happen. I am working with the hosting provider to restore full functionality as soon as possible.

Thanks for your patience and support.

Tekoa Da Silva
Bull Market Thinking
seeing that no one wants the barborous relic any more, they are pulverising it and dumping it in the sea, off Alaska, rebalancing supply/demand and creating lots of new jobs, in one perfect move .........

Just gotta be careful to ensure they only dump it at a rate that keeps it around $1600 an ounce.
The Brotherhood of Darkness doesn't like that this info is being disseminated. Soon, all sites [such as this] will experience denial of service attacks as the gold/silver situation becomes more and more unmanageable. The truth will eventually be on the street either way. The Dark Princes are backing up their trucks as I type......
SD reporting that COMEX silver is also disappearing:
Epic drainage of physical silver inventories continued Monday, as Brinks’, CNT, and Scotia all reported massive withdrawals of silver from their COMEX depositories. The biggest withdrawal came in the CNT vault, where 1.138 million ounces (including 737k REGISTERED oz) were withdrawn- an astonishing 17.3% of CNT’s entire physical silver inventory vaporized overnight!

It maybe isn't a coincidence that gold inventories at the COMEX have been dropping so fast when at the same time GLD inventories were dropping like mad. If this is the reason, then the GLD inventory is COMEX futures contracts which would be a major scandal.
I checked Harvey's latest report. Looks like (as much as you can trust the COMEX reports anyway) the 7-9 standard deviation crash has stopped the draining of COMEX vault inventories:

Withdrawals from Dealers Inventory in oz nil
Withdrawals from Customer Inventory in oz nil
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 94.45 (Brinks)

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 914,919.66 oz (Brinks,CNT,)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 1,543,323.695 (Brinks,CNT, HSBC)
dumb question -

why would a large drop in pm prices slow or stop the draining of COMEX vault inventory ?

I got the idea that paper traders were dumping but everyone else was discretely trying to buy metal ..........

I probably need to read up all over again how the paper markets work )-:
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