PAPER COMEX MARKET MELTING AWAY

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India’s disastrous attempt to restrict gold imports has crushed the country’s jewelry trade. India’s gold imports crashed 95% in August to just 2.5 tonnes from month before. That’s unsustainable. Additionally, prices in India are $35 above London spot. The government convened a high level meeting during which it heard from jewelers. I speculate that the heavy handed restrictions on gold will soon be removed.

 

Russia’s central bank picked up the pace of its gold buying and added 408,948 oz. in August. Russia has been adding an average of 200,000 oz. to 300,000 oz. per month.

The GLD continues to witness a gradual withdrawal of gold amounting to about 500,000 ounces since Aug. 1. Roughly a third of GLD’s gold was redeemed since the beginning of the year.

Speaking of where’s the gold, this is what happens when producers no longer use the Comex for hedging purposes. Producer shorts are a minuscule 12,861 contracts. The paper Comex market is melting away as the open interest on the entire gold comex contracts fell to a multi-year low of 367,662.  The OI for first day notice in the October gold contract is 4247 and thus 424,700 oz of gold will stand for delivery.     So we have too many shorts in a thinned-out market, with a bare minimum amount of registered gold backing the trading. I grade the Commitment of Traders (CoT) as an A minus.

Trading in the GDXJ has also thinned out. Monday’s trading was 57% of the 3-month average.

Source: Hebba Investments

The Chinese are right back in the game. You can see the little three-week hiatus when POG went over $1,400, but the trend still looks positive.

 


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