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Comex Delivery Countdown: Mid-July Update

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This analysis focuses on gold and silver data provided by the Comex/CME Group. See the article What is the Comex for more detail.

Silver: Recent Delivery Month

First Position Day is when contracts must post 100% margin to stand for delivery. Once delivery begins, contracts can settle in cash, or more contracts can be opened and stand for immediate delivery (usually a sign of strong physical demand). Figure 1 below shows the last 24 months of silver delivery data when compared to First Position and the day before First Position. As can be seen, Open Interest falls significantly between the two days. This can be seen more clearly in Figure 4 below, the Open Interest countdown chart.

Silver is wrapping up a major delivery month that was on pace to potentially break records. However, something strange occurred on the final day. Open Interest collapsed by 12,000 contracts in the final day (difference between blue and green bars below). This is the largest drop in the final day for at least 24 months. Additionally, more contracts have been cash settled this month (red bar) since May of 2020 when the Comex was under a lot of delivery pressure.

Over the last year, each month has added contracts mid-month to stand for delivery but July 2021 bucked the trend and cash settled. Why? Hard to know for certain, but perhaps the Comex physical market is under more strain than the stock report suggests.

It could also be related to lower roll costs.

Figure: 1

We can see in Figure 2 below how this most recent month stacks up more directly with other major months. Figure 2 shows that silver deliveries are the lowest since March of 2020 and well below the record last July.

Figure: 2

To put this past July in historical perspective, see Figure 3 below. This shows the month of July dating back to 2011 when silver had seen its last major run up to $50. The chart shows the dollar amount of silver being delivered rather than the number of contracts. Because there are 5,000 ounces per contract, this is calculated by taking the (Number of contracts) * (price of silver) * (5,000).

While this month did not approach the record from last July, it is still high by historical standards.

Figure: 3

Silver: Next Delivery Month

Jumping ahead to August shows that silver has not necessarily lost its momentum. August is a minor delivery month for silver, but the trend (red line) is still moving up as First Position approaches.

Figure: 4

The chart below provides historical contracts, showing the delivery activity in the last minor months. As can be seen, April and June were both fairly high compared to the previous months. August is sitting at the same spot as June 2021. It will be interesting to see if it continues rising. Additionally, tracking cash settlement in August after First Position will show whether the cash settlement from July is a one-off or part of a new trend.

Figure: 5

Gold: Recent Delivery Month

The charts below follow the same order as the silver charts above.

July is a minor delivery month for gold. At 1,939 contracts delivered so far, it is nearly double the 1,011 contracts from First Position with 72 contracts still outstanding. While good to see 1,000 contracts to open and stand for immediate delivery, Figure 6 and 7 should help put this into context. The minor months are significantly below the major months.

Figure: 6

July has fallen well below the trend from prior minor months.

Figure: 7

Looking historically at July, the most recent July is still well above average, but not meaningful when compared to the major months.

Figure: 8

Gold: Next Delivery Month

August is a major delivery month for gold and the contract has started to roll. It’s impossible to know how many contracts will be open on First Position because most will roll or close between now and then.

Figure: 9

The last several major month delivery patterns show a clear downtrend. It will be interesting to watch if this trend continues or is able to reverse some. Figure 11 below shows the “Cost to Roll”. Being very low, it’s hard to imaging a large number of contracts standing for delivery unless they see immediate risk at the Comex.

Figure: 10

The cost to roll is the difference between the current month and the next major month. It is very low compared to recent months. If this turns negative, it could be a bullish sign as investors discount more time in a contract rather than pay a premium. Currently, this is just low but not negative.

Figure: 11

Wrapping up

Silver is still showing some strength despite a disappointing delivery amount for July. Gold needs to reverse course soon in order to recapture some of the near-record deliveries from 2020.

Figure: 12

Data Source:

Data Updated: Nightly around 11PM Eastern

Last Updated: Jul 15, 2021

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