Gold has been seeing a large number of contracts roll in the final day of the contract. That did not happen this month. This has resulted in a large delivery volume.
Figure: 1 Recent like-month delivery volume
So far, 16,923 contracts have been delivered with 4,583 contracts remaining in open interest. Assuming these deliver, the total will exceed 21,500 contracts. Add in another 2,000 potential net new contracts (the recent average – red bars below), and gold could see upwards of 23k contracts delivered. This would be the largest delivery volume since October last year.
Figure: 2 24-month delivery and first notice
As shown below, open interest in April had been trending lower over recent weeks. April bucked the trend when it saw very few contracts roll in the final day (red line going flat).
Figure: 3 Open Interest Countdown
The House accounts are showing an interesting trend. BofA was back in the market buying, adding 4,368 contracts. Delivering out was JP Morgan who issued 10,682 contracts. Many other house accounts were actually buying but in smaller volumes. Wells, Macquire, and Citi were all buyers this month.
Figure: 4 House Account Activity
JP Morgan likely knew this was coming. Last week, we identified JP as making a massive move from Eligible to Registered to the tune of 578k ounces of gold ($1.15B). This was clearly a move to cover what was going to be a large delivery month. As they issued over 1M ounces worth of gold yesterday, they will likely be handing over more than all the Registered metal they moved last week.
Figure: 5 Recent Monthly Stock Change
Net removal of metal from the Comex has been slowing in recent months. With this latest move by JP Morgan, the exodus of metal may resume. That said, another possibility is JP Morgan trying to disperse their metal across different house accounts considering that BofA, Citi, and Wells house accounts took delivery on almost 9,200. House accounts are probably less likely to remove the metal, so TBD on what the motives were here… but no question that it was planned.
Figure: 6 Recent Monthly Stock Change
Gold: Next Delivery Month
Looking ahead to May (a minor month for gold), open interest is a bit below trend. As highlighted in the technical analysis, it is odd – and possibly bullish – to see open interest low with much higher prices. Futures are not the sole driver in the latest price move.
Figure: 7 Open Interest Countdown
Looked at it as a percentage of Registered shows gold in the middle of the range.
Figure: 8 Countdown Percent
Delivery volume is still elevated but also trending down in minor months.
Figure: 9 Historical Deliveries
The cash market looks very well controlled, but with spreads getting a bit wider at each roll period.
Figure: 10 Spot vs Futures
Silver: Recent Delivery Month
Silver is on the other side, seeing a full collapse in delivery volume. I have hypothesized before that this is because there is simply little metal to deliver so contract holders are being encouraged to roll or cash settle.
Figure: 11 Recent like-month delivery volume
Silver never really saw any interest in the April contract despite everything going on in the banking sector.
Figure: 12
The game in silver has been after the contract start delivering. This can be seen with the red bars below, so time will tell if we see an uptick in delivery volume. April actually finished stronger than both February and November, so it is not impossible to see a jump in deliveries.
Figure: 13 24-month delivery and first notice
House Accounts
BofA was active last month, with the highest volume since last March. They are still restocking after the major backstop they created in September. The activity has been muted this month so far.
Figure: 14 House Account Activity
Unlike gold, the removal of silver has continued unabated. There was a surge in Registered at the start of the March contract but metal continues to be removed from the vault in both Registered and Eligible. If anything has slowed, it has been the additions to the Eligible vault that had been occurring through most of last year. The direction has become much more one-way in recent months (primarily out).
Figure: 15 Recent Monthly Stock Change
Silver: Next Delivery Month
May silver is a major month but is starting well below trend. Similar to gold, this level of open interest despite rising prices could be a very bullish sign.
Figure: 16 Open Interest Countdown
On a relative basis, May is actually looking quite strong!
Figure: 17 Countdown Percent
Major month volume has been falling after peaking last March during the start of the Ukraine war.
Figure: 18 Historical Deliveries
The spread costs remain near recent highs, suggesting traders anticipate higher prices in the future.
Figure: 19 Roll Cost
The spot market has jumped back up out of backwardation for the time being.
Figure: 20 Spot vs Futures
Platinum
Finally, we turn to Platinum which was rather disappointing. This could have been planned though. The last major month in Platinum saw over 100% of Registered stand for delivery which caused the Comex to rush some metal into the vault at the last minute. Clearly, the Comex did not want to see a repeat.
Figure: 21 Platinum Delivery Volume
Open interest in platinum was being pushed lower much earlier in the contract.
Figure: 22 Platinum Countdown Percent
Furthermore, physical inventory saw an uptick early last week as another safety measure.
Figure: 23 Platinum Inventory
Wrapping up
Delivery volume has picked back up in gold. Silver delivery volume remains suspiciously quiet but the exodus of metal from Comex vaults has continued. Platinum had three challenging major months, but the Comex finally got a handle on the activity.
Smart money is still quietly taking metal out of the vault. The latest uptick may be in response to SVB. The big players are diversifying away from the banking system and turning cash into physical metal. The detailed report shows that much of the activity was from JP Morgan to other bank house accounts. The activity over the next few weeks could help explain this move. Is it for confidence reasons? Is someone preparing to take delivery? Are the house accounts sensing weakness somewhere? Hard to know, but clearly people recognize that a move to physical is a way to diversify away from the banking system.
Figure: 24 Annual Deliveries
Data Source: https://www.cmegroup.com/
Data Updated: Nightly around 11 PM Eastern
Last Updated: Mar 30, 2023
Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/goldsilver/
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