In 5 days, the COMEX has seen 4,190 contracts open and stand for immediate delivery. 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.
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 the 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. Again, it’s important to note that in just five 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
Gold: Next Delivery Month
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.
The gold price is taking a breather after a strong week in anticipation of the jobs number today. A weak number could definitely fuel another attempt at new all-time highs with a strong number likely creating a modest pullback. Regardless, the price action has been very bullish and a breakthrough to a new all-time high seems ready to happen sooner than later.
Better to get on board this train before the train leaves the station. If the general public turns its eyes to the physical market, they will be disappointed to find very limited supply available at current prices. The Comex does not have enough inventory to meet any major demand for physical.
Figure: 14 Annual Deliveries
Data Source: https://www.cmegroup.com/
Data Updated: Nightly around 11 PM Eastern
Last Updated: May 04, 2023
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