Delivery Results: Gold and Silver Both Underwhelm
This analysis focuses on gold and silver physical delivery on the Comex. See the article What is the Comex for more detail.
Delivery for both gold and silver was underwhelming.
Silver: Recent Delivery Month
Silver has started delivery in a major month. As can be seen below, the amount delivered is below recent months at 3,826 contracts. There are still ~1700 contracts remaining open.
Ignoring the anomaly in July, contracts have been added mid-month for delivery, but even if enough contracts come in to bring the total to 6,000 delivered, this would still be well below the recent numbers.
Even more surprising is that this is the last major month before the December contract. Last September had 11k contracts stand for delivery, making the current number even more disappointing.
Figure: 1 Recent like-month delivery volume
Once again, there was a big drop-off on the final day before First Position (difference between blue and green bar). This had not been the case until July of this year. As of yesterday, it looked like September was showing promise, but a lot of contracts were closed (7,200) and most of those did not roll to future months (4,700).
A large number of contracts closing is odd behavior and bucks the trend that had developed since March 2020.
Figure: 2 24 month delivery and first notice
Isolating the month of September over the past several years shows how this September stacks up to previous ones (dollar amounts shown). Again, the trend is down despite a higher Silver price.
Last month gold saw similar disappointing results but then had a massive month in contracts opened for delivery. This was discussed in the last Comex article. Can silver replicate gold’s performance?
Figure: 3 Notional Deliveries
Silver: Next Delivery Month
Jumping ahead to October, a minor delivery month shows a positive trend! Silver open interest is currently exceeding all past minor months for the same point in time.
Figure: 4 Open Interest Countdown
If the trend continues, then deliveries could exceed some of the large minor months over the past year. This would be a good sign heading into the year-end with the December contract on the horizon.
Figure: 5 Historical Deliveries
Gold: Recent Delivery Month
The charts below follow the same order as the silver charts above.
September gold really fell flat to start the delivery month. After seeing a really positive trend develop for August delivery (red bar in Figure 7), it was disappointing to see such a small number of contracts at First Position.
Again, contracts could open mid-month, but August might have been the exception rather than a new trend.
Figure: 7 Recent like-month delivery volume
With September being a minor delivery month, it’s important to put the delivery activity in perspective to the major months. August finished with 7,166 contracts opening mid-month for delivery. That is more than 7x the amount that stood for delivery to start September.
Figure: 8 24 month delivery and first notice
Similar to silver, September gold also looks weak when compared to historical September months. The total (so far) is not even in the top 3 best September deliveries going back to 2009.
Figure: 9 Notional Deliveries
Gold: Next Delivery Month
October gold is an off month. Neither major nor minor, It serves to bridge the gap between August and December gold but December still has more open interest (400k vs 40k).
Figure: 10 Open Interest Countdown
Even though it doesn’t compare to the other major months from an aggregate open interest standpoint, total deliveries were very strong last October. Depending on how the data plays out over the next month (CPI and Jobs), it’s not impossible to see a strong delivery month again this year.
Figure: 11 Historical Deliveries
Cost to Roll
The cost to roll is still very low. The chart below shows the spread between the current month and the next major month. It’s still hovering at very low levels which would not drive deliveries on its own. In fact, more contract holders may be willing to roll when the cost to roll is so low.
Figure: 12 Roll Cost
With December as the final major month in both gold and silver, it’s clear that 2021 will come in well below the delivery volume seen in 2020. Regardless, it’s still been a strong year relative to history.
Figure: 13 Annual Deliveries
Data Source: https://www.cmegroup.com/
Data Updated: Nightly around 11 PM Eastern
Last Updated: Aug 30, 2021