Comex Countdown: 1 Day to Go – March Delivery Could Set Records
As mentioned yesterday, daily updates into the March close are warranted given the extreme situation in the market. Today is First Position, which means the data tonight will give the first indication of March deliveries. Let’s get into it…
When compared to previous major months, open interest went from middle of the pack to front of the back. With one day to go, open interest is now higher than even July 2020, which was the biggest delivery month on record.
Figure: 1 Open Interest Countdown
July was head and shoulders above the rest…
Figure: 2 Recent like-month delivery volume
Spreads have gotten very tight, and the market could potentially enter backwardation, indicating traders putting more value on the current month over future months.
Figure: 3 Roll Cost
We can see that March popped higher yesterday after a brief pullback. Considering April’s open interest dipped (shown below), it has to be assumed all of these new contracts will be looking for physical delivery.
Figure: 4 Open Interest Countdown
April is also showing a big move above trend in terms of open interest as shown below. There was a slight dip in open interest yesterday in the market sell-off, but this is rather small compared to the massive move-up seen recently.
Figure: 5 Open Interest Countdown
Finally, the spreads on the April contract remain normal (for now).
Figure: 6 Roll Cost
What does it all mean?
Yesterday was a very volatile day in the market overall with big reversals across the board. Gold saw an almost $100 swing throughout the day. The selling was not coming from people who want physical (as shown in the March spike) and the 8.7k dip in April was actually met with a very similar 8.2k increase in June (not shown above but can be seen here). The price volatility in precious metals was really just noise. Underneath, the trends are still showing March could set records with delivery in silver. Gold is looking very strong for a minor month as well.
We will know a little more tomorrow when deliveries start to hit, but these trends will play out over the next several months. Given the large cash settlements in gold for February, it makes you wonder how deep the physical supply is right now.
Data Source: https://www.cmegroup.com/
Data Updated: Nightly around 11 PM Eastern
Last Updated: Feb 24, 2022