Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Comex: Platinum Shorts Live to See Another Day

  by    0   0

I typically start this analysis with gold, but the action in the platinum market is impossible to ignore. The next four charts should tell you everything you need to know.

First, similar to gold and silver, platinum has seen a much higher delivery volume since the pandemic struck in 2020.

Figure: 1 Platinum Delivery Volume

Unfortunately, I do not have a deep history of inventory data in platinum, but similar to gold and silver it has seen some major supply drawdowns so far in 2022. Supplies are now down over 50% since the April peak. On the most recent day, Eligible saw 34k ounces leave the vault. This represents 23% of Eligible supply and 15% of total platinum supply in the Comex. In a single day.

Figure: 2 Platinum Inventory

The countdown in platinum was looking very compelling. Three days out, more than 500% of platinum’s available Registered inventory was still open. With one day to go, this value stood at 192%. This was well above the 50% and 78% seen in April and July at the same point in the contract. This means platinum was on pace to see delivery volume nearly 2x higher than available supply.

Then all of a sudden, on the final day of trading the contract dives all the way to 45% of total registered available. Figure 1 shows that every major month since Covid has seen at least 2,000 contracts stand for delivery. October is now looking like volume will be around 600 contracts delivered. This is 2.72 standard deviations below the mean since Covid started.

Figure: 3 Platinum Countdown Percent

To highlight the anomaly seen on the final trading day, consider the chart below. For the past two+ years, platinum dives into the close and then moves laterally on the final day of trading. October 2022 is the lone standout where the contract dives on the final day.

If we again calculate the probability of such an event occurring since Covid, this type of drop is 8.86 standard deviations above the norm. Meaning the chances of such a large drop into close is less than 0.0001%. Hmmm… seems a bit strange. This is a massive outlier. This feels very similar to what happened in silver back in February which saw a 12 standard deviation event occur. The silver delivery markets have been broken ever since.

Figure: 4 Platinum Countdown

It’s hard to know exactly what happened, but it’s easy to speculate. So, let’s speculate.

My guess is that a savvy trader who is willing to take delivery knows the lack of supply in platinum. This trader can see all the data and knows the very limited supply of platinum at the Comex, which is shrinking more with each passing day.

Instead of rolling, the trader holds on, threatening to take delivery. The Comex does not have the metal. This cannot be allowed to happen, it could send shockwaves through the entire futures market, specifically gold and silver. So, the Comex offers cash settlement at a very nice premium. The total platinum held yesterday was $121M. This is a rounding error, but a failure to deliver could create a cascading domino effect.

The Comex would be happy to pay a premium and not put the rest of their markets at risk. A single trader (or perhaps a small group of traders), took on a little risk by playing their hand like they would take delivery. This forced the Comex into paying a huge premium to NOT have to deliver the metal it DOESN’T have!

Again, speculation… but if I had $100M to bluff with… this would be a great way to collect a nice little return. Corner a tiny market and apply maximum pressure to an overstretched entity.

Gold: Recent Delivery Month

Let’s move on to gold. Unfortunately for the Comex, October didn’t offer any relief from strong physical demand. October started the month very hot with 19k contracts delivered on the heels of the strongest minor month ever (September).

Figure: 5 Recent like-month delivery volume

Perhaps most surprising was the lack of contracts that rolled in on the final day. This is the exact opposite of the platinum market. October barely saw any drop in OI which has led to a very strong start to December.

Figure: 6 Open Interest Countdown

This can be seen more clearly in the chart below comparing the difference between the green and blue bars. That difference represents the drop in OI on the final day.

Figure: 7 24-month delivery and first notice

Another standout datapoint in October is the percent of contracts delivered in the final month. 93.3% of open interest was delivered on the very first day of the contract. This shattered the existing major month record of 76.3%.

Figure: 8 Delivery Volume After First Notice

Looking at past Octobers, this is already the second highest October recorded standing at about 50% of the October record set in 2020.

The bank house accounts are on the delivering “out” side of the transaction this month, except for BofA who continues to break from the pack. BofA was the lone house account to receive metal.

Figure: 10 House Account Activity

All this delivery volume is taking its toll on vault inventories of gold. The continued outflow of gold has been relentless for months. Since May, over 9M ounces have left Comex vaults.

Figure: 11 Recent Monthly Stock Change

Gold: Next Delivery Month

November gold is another minor month as the market prepares for the major December contract. As shown below, open interest has turned up quite quickly!

Figure: 12 Open Interest Countdown

The chart below shows the last 9 minor months. There is a solid upward trend forming. The record minor month that just closed last month can also be seen (September).

Figure: 13 Historical Deliveries

Silver: Recent Delivery Month

While platinum and gold continue to flash warning signs, the silver market has been (seemingly) left for dead. There were 55 deliveries on the first day of delivery action.

Figure: 14 Recent like-month delivery volume

This is not totally surprising given the tiny number of contracts headed into First Notice. The action in silver has mainly been seen in net new contracts rather than at First Notice. Time will tell if it occurs again this month.

Figure: 15 24-month delivery and first notice

Even though the delivery volume in silver has been non-existent, the actual physical removal of silver from Comex vaults continues unabated. Every day there is more and more silver leaving Registered. Just like platinum, there is a day looming when deliveries may exceed the available Registered supply.

Figure: 16 Recent Monthly Stock Change

Silver: Next Delivery Month

November silver is starting sluggishly with current open interest well below average.

Figure: 17 Open Interest Countdown

One more thing silver has going for it is that the spot market remains in backwardation. This has been ongoing since July 4th and demonstrates strong demand for physical metal now rather than in the future.

Figure: 18 Spot vs Futures

Wrapping up

Gold continues to show incredible strength in delivery volume. Platinum looked like it was on the verge of “breaking” the Comex before a massive drop into the close. Silver on the other hand has shown weak delivery but extremely strong physical inventory movement.

Bottom line, the data from Comex continues to point to a physical market that is under pressure. The paper market may continue to see massive selling from speculative shorts, but eventually, the physical market will start to drive the price of precious metals higher.

Figure: 19 Annual Deliveries

Data Source: https://www.cmegroup.com/

Data Updated: Nightly around 11 PM Eastern

Last Updated: Sep 29, 2022

Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/goldsilver/

Download SchiffGold's 401k IRA Rollover Free Report

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Money Supply Dips for First Time Since November

Money Supply is a very important indicator. It helps show how tight or loose current monetary conditions are regardless of what the Fed is doing with interest rates. Even if the Fed is tight, if Money Supply is increasing, it has an inflationary effect.

READ MORE →

CFTC CoTs Report: Managed Money Still Driving Prices

Please note: the CoTs report was published on 03/22/2024 for the period ending 03/19/2024. “Managed Money” and “Hedge Funds” are used interchangeably. The Commitment of Traders report is a weekly publication that shows the breakdown of ownership in the Futures market. For every contract, there is a long and a short, so the net positioning will always […]

READ MORE →

Is Someone About to Stress the Comex

The CME Comex is the Exchange where futures are traded for gold, silver, and other commodities. The CME also allows futures buyers to turn their contracts into physical metal through delivery. You can find more details on the CME here (e.g., vault types, major/minor months, delivery explanation, historical data, etc.).

READ MORE →

Inflation is Proving to be Quite Sticky

This analysis takes the BLS inflation data and recalculates the percentage changes at the category level to get unrounded numbers. The total number ties to the BLS, but it gives more detail at the granular level.

READ MORE →

Jobs: Massive Revisions and Household Survey Tell the Real Story

The analysis below covers the Employment picture released on the first Friday of every month. While most of the attention goes to the headline number, it can be helpful to look at the details, revisions, and other reports to get a better gauge of what is really going on.

READ MORE →

Comments are closed.

Call Now