In today’s Featured Articles section in our newsletter, the featured topic is China’s insatiable demand for physical gold. This is the game changer. The link between the highly leveraged paper (Comex) gold and the physical gold that is flowing east is weakening by the day.
Check out what is happening on Comex. They have very little gold to deliver against a huge amount of contracts. How this plays out will be interesting. Harvey Organ sent Andy Hoffman his data on the OI (open interest). Below, are Harvey’ comments and Hoffman’s comments…
Harvey Organ wrote: The December OI (Open Interest) contract month fell by 23,499 contracts to 10,157 and its resultant OI is extremely high and thus we have a huge number of gold ounces standing in December.
Today we strangely had only 68 notices served upon our longs for 6800 oz of gold. On first day notice on the biggest delivery calendar of the year, the tiny notices filed is just totally unbelievable.
In order to calculate what will be standing for delivery in December, I take the total number of notices served (68) x 100 oz. per contract to give us 6800 oz. served from which add the difference between the OI standing for December (10,157) minus the number of contracts served today (68)x 100 oz per contract.
Thus we have the following gold ounces standing for gold in December and this is a initial standings for December gold: 68 notices x 100 oz. per contracts already served this month or 6800 oz. + (10,157- 68) x 100 oz. = 1,015,700 oz. or 31.59 tonnes of gold. As you will see below we have only 14.249 tonnes in the registered or for sale category for the big 3 (JPMorgan, HSBC,Scotia) and 18.37 tonnes if you include Brinks. They will certainly need divine intervention if they are going to settle upon all of these longs.
Andy Hoffman replied: “As far as I know, this is the very first time that open interest has been larger than registered inventory on or after 1st notice day. We also have not seen all of October’s deliveries to exit COMEX inventories yet so some of the metal already seems to be spoken for. This is going to be interesting to say the least.”
Harvey Organ wrote back: “If the data on Friday did not shock you, this will.
Amount of gold notices filed for Monday for Tuesday delivery: Only 12.
Total notices served upon for the first two days: Only 80
For comparison let us check silver:
Number of notices filed: 552 for 2,760,000 oz.
Total number of notices served upon in the first two days: 1338 for 6,690,000 oz/
I think we have a major problem in gold as they just do not have the physical gold to deliver upon.”