There are stories circulating in the gold market that Comex does not have enough gold in its inventories to meet hypothetical demand, that the ratio of gold in Comex depositories available to meet Comex delivery specifications is at perilously low levels. The first chart here shows that while the percentage of Comex gold open interest covered by total Comex reported stocks has fallen over the past year and a half, it remains very high by historical standards and presents no perceptible risk of imminent problems with deliveries.
More charts in this Commentary show other ratios, of open interest to deliveries and of deliveries to registered stocks. All point to the same conclusion: There is no crisis brewing on Comex. In fact, by most measures the Comex is better stocked now than it was for most of the first 30 years of the existence of a gold futures contract on the Comex.
Such spurious rumors infecting the gold market, or at least the periphery commentary related to the gold market, is not surprising. In fact, it is not new. The same purveyors of scary but false warnings used the same bogus argument in August 2013. CPM Group wrote about that ploy in a Market Commentary on 19 August 2013, Much Ado About Nothing.
CPM Group views gold as an excellent investment at current prices and market conditions, on a long-term basis. We do not expect prices to rise sharply for a couple of years, however, since we do not see any exogenous economic or political problems become so threatening as to stimulate sharp increases in investment demand until late 2017 at least. With gold and other precious metals prices having fallen in recent months and remaining weak, a few gold marketing groups have become more desperate about convincing investors to keep buying gold, resorting to misleading market commentary suggesting that gold prices are about to ‘explode’ sharply higher due to fundamental tightness. This is only one of the false stories being used to try to bull the market higher. CPM Group’s Market Commentary 2015-2, The Non-Existence Of A London Gold Forward Backwardation, released earlier today deals with another false rumor.
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Copyright CPM Group 2012. Not for reproduction or retransmission without written consent of CPM Group. Market Commentary is published by CPM Group and is distributed via e-mail. The views expressed within are solely those of CPM Group. Such information has not been verified, nor does CPM make any representation as to its accuracy or completeness.
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