Comex Vaults: Gold Sees Nearly 5% Inventory Decline in a Month
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.
Gold has seen 10 straight months of outflows from the Comex vaults. February has had 500k ounces leave the vault month to date, following a 900k exodus seen in January.
Figure: 1 Recent Monthly Stock Change
The daily outflows have picked back up again after a relatively slow December where only 200k ounces left the vault in net. Since Jan 20th, there have been 9 days where more than 75k ounces were taken out of the Comex vaults.
Figure: 2 Recent Monthly Stock Change
Pledged gold has seen a pretty big decline as well since July last year, falling 25% or 600k ounces.
Figure: 3 Gold Pledged Holdings
Outflows in silver have also picked up again after a modest inflow during December. As the market heads towards a major delivery month in March, it will be interesting to see if the Comex is forced to restock to satisfy delivery requests. (This would suggest that zero is not the true bottom, but instead somewhere above that).
Figure: 4 Recent Monthly Stock Change
The daily activity shows that Eligible has lost over 5.5M ounces in a month. Registered has flatlined hard since February 8th. Total Registered stock now sits just under 32M ounces which is a new low for the move.
Figure: 5 Recent Monthly Stock Change
The table below summarizes the movement activity over several time periods to better demonstrate the magnitude of the current move.
- Over the last month, gold has seen Eligible fall a whopping 8.1%
- Registered is now a bit higher than Eligible for the first time since August last year
- Since last year, total gold holdings have fallen by 33.5% or 10.9M ounces
- Over the last month, gold has seen Eligible fall a whopping 8.1%
- Silver saw a decline of 2.3% over the last month
- The three-year drop in Registered silver has exceeded 110M ounces or 77.7%
- 50M of that has happened in the last year alone
Palladium and platinum are much smaller markets but it’s possible that is where the market breaks first.
- Palladium and Platinum both saw declines of around 1% for the month
- Palladium is about to enter its major month with only 52.7k ounces total in the vault
Platinum took it on the chin in January, and the Comex had to scramble to restock supplies. Now Palladium is up and could face a similar squeeze if investors sense there is not enough supply to cover demand.
Figure: 6 Stock Change Summary
The next table shows the activity by bank/Holder. It details the numbers above to see the movement specific to vaults.
- 6 vaults lost gold over the month while only one added (HSBC)
- JP Morgan and Malca both saw supplies shrink by more than 10%
- The last week only saw net outflows, affecting 6 vaults
- Silver also saw steady outflows across nearly all vaults. Only Delaware and Loomis saw inflows
- 5 vaults saw outflows that exceeded 3% of their total holdings
- The trend for the last week matches the last month very closely
Figure: 7 Stock Change Detail
Zooming out and looking at the inventory for gold and silver shows just how massive the current move has been. The black line shows Registered as a percent of total. Inventories have been falling evenly in both categories, which is why the black line has stayed relatively stable even while supplies have been crashing. It’s amazing how closely the ratio has stayed close to the 50% mark.
In September 2019, all of the Registered stood for delivery, so, likely, this ratio is now being actively maintained to make sure confidence persists in the system.
Figure: 8 Historical Eligible and Registered
Silver is way more sporadic, with pretty wide fluctuations. At this point, Registered only accounts for 10% of the total inventory. This is the lowest level dating back to at least 2000.
Figure: 9 Historical Eligible and Registered
The fall in Registered has been swift and relentless. As the chart below shows, silver quickly reached a peak and then more dramatically reversed and all Registered silver is being removed. Registered is not yet at the lows seen back in 2016 (25M then vs 31M now), but it is rapidly approaching that level. As noted above, Registered relative to Eligible is at the lowest level on record.
Something will break long before supply hits zero, which means the actual bottom is somewhere above zero (as mentioned above). Given how outflows have been flatlining from Registered in recent weeks… supply might actually be closer to zero than the data suggests.
Figure: 10 Historical Registered
The LBMA has been seeing similar outflows of silver from their vault, but that appears to have stopped for now.
Figure: 11 LBMA Holdings of Silver
Available supply for potential demand
Coverage on the Comex continues to deteriorate. On Jan 26, before the recent sell-off in gold, the amount of paper gold for each Registered physical ounce was 4.6. That is the highest level since July 2020, right before all the new supply was added.
Figure: 12 Open Interest/Stock Ratio
Coverage in silver is far worse than in gold. The paper to Registered physical ratio reached 22 ounces on Feb 2nd before the recent sell-off. This means that if even half of contract holders stood for delivery, there is enough silver for 1 out of 11 contract holders.
Figure: 13 Open Interest/Stock Ratio
Physical supply keeps dwindling. It is not a massive rush out, but a slow steady drop of supply out of the Comex vaults. It almost seems strategic in nature (i.e., a party is slowly but intentionally removing Comex supply).
Eventually, the action in the physical market will converge and we might see new record delivery months. When this happens, Comex will soft default. They will cash-settle people, or pull other tricks to satisfy physical demand. But one thing is certain, not everyone is going to get their physical metal, especially at current prices. Better to stock-pile physical now, before this happens.
Data Source: https://www.cmegroup.com/
Data Updated: Daily around 3 PM Eastern
Last Updated: Feb 21, 2023
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