The Surge in Gold Inventory Continues at Comex

This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults.

Registered = Warrant assigned and can be used for Comex delivery, Eligible = No warrant attached – owner has not made it available for delivery.

Current Trends

Gold

As noted last month, banks have been restocking gold at the fastest pace since 2020. The surge in inventory has continued with banks adding 1.1M ounces so far in March and 2.1M ounces since the report last month.

Figure: 1 Recent Monthly Stock Change

As can be seen below, this has been evenly distributed between both Eligible and Pledged. In fact, the big add last week of 432k ounces came in as Pledged, which is a subcategory within Registered.

Figure: 2 Recent Monthly Stock Change

Silver

Silver continues to show a different trend than gold. Silver has experienced consistent outflows for 4 months now, with net outflows occurring in 7 of the last 8 months.

Figure: 3 Recent Monthly Stock Change

The chart below depicts a very interesting scenario. A large volume of silver moved from Registered (available for delivery) to Eligible (owner does not want metal available for delivery). Then there was a steady withdrawal of the silver from Eligible out of the Comex vaults. This indicates that investors were taking delivery and then removing the metal from the Comex system.

Figure: 4 Recent Monthly Stock Change

The table below summarizes the movement activity over several time periods.

Gold

• Gold has increased its total inventory by 6% in the last month
  • Increases have been in both Registered and Eligible
  • Registered increased by 435k in the last week, but this was in Pledged (see Figure 5 below)
• The recent move has made the TTM nearly flat, meaning the last 6 weeks have undone a years’ worth of metal leaving the Comex system
  • Where is all this new gold coming from?

Silver

• Silver has seen stock deplete by 31.7M ounces over the last year or 8.6%.
  • The last month has seen continued drainage with 7.4M ounces leaving
    • This represents almost 25% of the TTM total

Figure: 5 Stock Change Summary

As mentioned above, Pledged saw a big inflow last week. This was the largest single-day inflow since at least December 2020.

Figure: 6 Gold Pledged Holdings

The next table shows the activity by bank/Holder. It details the numbers above to see the movement specific to vaults.

Gold

• Nearly every vault has added to inventory in the last month
  • Each vault participated in the Pledged increase last week
• Three of the 8 vaults are now positive on a TTM basis
• JP and Brinks both added over 700k in the last month, representing 5.2% and 8.5% respectively

Silver

• In stark contrast to gold, nearly every vault has lost metal over the last month
  • CNT lost nearly 15% of its inventory (4.5M) while HSBC lost 9.5% (1.7M)
• Three vaults (Manfra, INT, HSBC) are now down 30% on a TTM basis

Figure: 7 Stock Change Detail

It’s strange to see gold and silver moving in such opposite directions. The vaults are clearly trying to solidify their gold holdings. The curious aspect is that on paper, the vaults show large quantities in both Registered and Eligible. If this was truly the case, why is there such an effort to rapidly replenish stock positions?

Historical Perspective

Zooming out and looking at the inventory for gold and silver since 2016 shows the impact that Covid had on the Comex vaults. Gold had almost nothing in the Registered category before JP Morgan and Brinks added their London inventory with nearly 20M ounces.

The recent effort to restock is shown on the far right. From this perspective, the increase in inventory appears relatively small. However, if that is truly the case, why the sudden increase across all vaults simultaneously? It seems odd that all the banks would start restocking at exactly the same time.

Explaining this behavior wanders into the world of speculation, but it should still be noted.

Figure: 8 Historical Eligible and Registered

Silver also saw an increase in Registered around March 2020, but has been draining consistently since then.

January 2022 saw a big move of Registered back to Eligible. That was reversed in March (see dip and recovery in black line). Beyond the shuffling between Eligible and Registered, the metal is still clearly moving out of the vault at an aggregate level.

Figure: 9 Historical Eligible and Registered

Available supply for potential demand

As can be seen in the chart below, the ratio of open interest to total stock has fallen from over 8 to 1.5. In terms of Registered (available for delivery against open interest), the ratio collapsed from nose bleed levels (think Nov 2019 where 100% stood for delivery) down to 2.87 in the latest month. This is down from 3.41 in early March.

Figure: 10 Open Interest/Stock Ratio

Coverage in silver is weaker than in gold with 9.85 open interest contracts to each available physical supply of Registered (up from 8.4 in late March). This is approaching levels not seen since June 2020.

The current up-move looks poised to enter the 10 handle for only the second time since June 2020 (on Feb 22, 2022, the ratio popped above 10 for a day).

Figure: 11 Open Interest/Stock Ratio

Wrapping Up

The Comex gold market has been flashing warning signs since early January. This continues to be the case. The latest influx of metal further supports the notion that banks are preparing for higher delivery volume and potentially higher prices. With so much supposed inventory on hand, it seems strange the banks would all collectively start adding to vaults. Watching this data over the coming months could shed light on what’s going on under the surface.

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

Data Updated: Daily around 3 PM Eastern

Last Updated: Apr 18, 2022

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