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Comex Update: Plunge in Available Gold for Delivery

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The latest update from CME Group shows a huge outflow of gold held for delivery by Comex. There are now less than 6 tons of registered physical gold available for delivery. For every 207 ounces of gold claimed by paper contracts on the Comex market, there is only one ounce of physical gold in Comex vaults. This is the lowest “coverage” ratio in the history of the Comex.

15 09 09 comex gold coverage ratio

What exactly does this mean for precious metals investors? The price of paper gold versus the price of physical gold is experiencing one of its biggest disconnects ever, because those paper gold contracts are so diluted. There’s never been a worse time to judge the strength of the fundamental strength of the physical gold market based upon Comex futures contracts.

If even a small fraction of Comex contracts were called in for delivery right now, there would not be nearly enough bullion to fulfill the orders. Major defaults on those contracts would occur, and the price of paper gold could collapse.

On the other hand, those left holding actual physical bullion would be find themselves part of a very prestigious minority.

You can read a good summary of this news on ZeroHedge, which concludes:

And while we know what caused this epic surge in potential claims on gold – namely the relentless outflow in registered gold – what we don’t know is whether this is a systemic event, one which threatens the next Comex gold delivery request with an ‘insufficient product’ response, and a potential default, or simply a one day abnormality.”

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6 thoughts on “Comex Update: Plunge in Available Gold for Delivery

  1. Burke says:

    It looks to me like the CME is operating much like a fractional reserve bank with gold as money and a reserve requirement less than 1/2 of one percent.

  2. Reuben says:

    What i find most interesting is that its always buisiness as usual around the Comex and no mention or coverage of this on television. It no longer bothers me though. Its just more opportunity for those enlightened.

  3. Helmut says:

    With these Facts why would anyone with common sense put their trust in Paper Gold?Unless it is for Speculation and one would use Monopoly Money(Spare change)and it is for fun and as a sport.

  4. JerzyDevil says:

    Nothing new.

  5. Jay says:

    If the Comex can always settle in cash, why does it matter how much registered gold they have?

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