Sep 29 2013, 02:24
Over the last few weeks it has been very quiet at the COMEX gold warehouses, but this week we saw one huge withdrawal out of eligible gold stocks that led to a new cyclical low for total COMEX gold inventories, and brought them down to a level not seen since 2005.
Keeping track of COMEX inventories is something that is recommended for all serious investors who own physical gold and the gold ETFs (GLD,PHYS, and CEF) because any abnormal inventory declines may signify extraordinary events behind the scenes that would ultimately affect the gold price.
The quiet period over the last month in COMEX gold inventories may be coming to an end as last week saw a large drop in total COMEX gold, though it was only from one warehouse (HSBC) that the majority of the gold was removed. We will take a closer look at these numbers but let us first explain the COMEX a little more for investors who are unfamiliar with it.
Introduction to COMEX Warehousing
COMEX is an exchange that offers metal warehousing and storage options for its clients. The list of their silver warehouses can be foundhere and their gold warehouses can be found here. In the case of silver and gold, the metal is stored at these official warehouses on behalf of banks and their clients and can be used to settle futures contracts, transferred between clients, or withdrawn from the warehouse. This offers large holders of precious metals a convenient way to store their metal with minimal storage fees – very convenient indeed if you hold large amounts of gold or silver and you don’t want to store them in your basement.
Silver and gold stored in these warehouses can fall into two categories: Eligible and Registered.
Eligible metals are those that conform to the exchange’s requirements of size (1000 ounce bars for silver and 100 ounce bars for gold), purity, and refined by an exchange approved refiner. Eligible metals are stored at COMEX warehouses on behalf of banks or private parties, but are not available for delivery for a futures contract.
Registered metals are similar to eligible metals except that these metals are also available for delivery to settle a futures contract. COMEX issues a daily report on gold, silver, copper, platinum, and palladium stocks, which lists all the metal that is currently stored in COMEX warehouses and how much eligible and registered metal is present.
This information allows investors insight into how much metal is currently backing COMEX futures contracts, what large gold and silver owners are doing with their metals, and how many clients are requesting delivery of their metals. There is a lot more to glean from this information but for the purpose of this article we will focus on the gold drawdown.
This Week’s Changes: Large Withdrawal from Eligible Gold Stocks Negates Last Month of Increases
Let us now take a deeper look at the gold draw-downs being seen in the COMEX warehouses…….
Read the full article at Seeking Alpha