Focusing on registered stocks versus open interest is a favourite of many bloggers because it produces dramatic “Comex is about to fail” figures. I have written many times that one also needs to consider eligible stocks as eligible inventory can be converted to registered relatively quickly. Blogger Kid Dynamite noted in passing in an email that December was a textbook example of eligible being used by issuers to make deliveries to stoppers. Not one to take the words of a cartel apologist at face value, I contacted data wrangler Nick Laird for detailed Comex warehouse movements and issuer/stopper figures, to check the facts for myself (and you).
To set the scene, at the beginning of December total registered stocks in all Comex warehouses was 120,967.246 ounces of gold. In retrospect, we know that the total number of contracts that stood for delivery during December was 2033, or approximately 203,300 ounces. Since that number is larger than the total registered stocks, you may be surprised why you didn’t hear about the default of Comex. The reason is that gold was either deposited directly into registered stocks in a Comex warehouse or gold was transferred from eligible to registered.
The table below shows all the changes in registered and eligible stocks per day per warehouse. Note that every single registered change during December was positive. I have coloured them by whether they were directly deposited (yellow), a transfer from eligible to registered (gold), or unknown (blue). In the case of the unknown, these are most likely transfers in my opinion but it is hard to be clear about that as the eligible change is including other movements.
Note that the total increase in registered during December was 154,947.693 ounces – 76% of the contracts standing for delivery – and that 105,086.452 ounce were clearly eligible to registered transfers, given the exact ounces involved. However, what is interesting is how these deposits into registered stocks match up with contracts “issued”, which are listed in the table below.
In this table I have multiplied out the number of contracts by 100 to show them as ounces (and also combined customer and house so the table is easier to read). You will note that the numbers coloured match the amounts being delivered into registered on the same day. For example, on the 15th HSBC issued 223 contracts (22,300 ounces worth) and in the warehouse movements figures we can see a transfer from eligible to registered on the 15th of 22,301.706 ounces.
The warehouse movement ounces of course generally will not match exactly with number of contracts as 100oz bars are usually odd weight where the bar’s weight varies between each bar within a specified tolerance, or where three kilobars are being delivered (which while being exact weight, are 32.15oz each so will rare exactly equal multiples of 100oz, see here for more info). Nevertheless, the repeated movement from eligible to registered matching issued amounts on the same day is proof that eligible stocks can be drawn upon by shorts to meet their obligations. Accordingly, solely looking at registered stocks to open interest is not a reliable indicator of the ability of shorts to make delivery.
For Trainspotters Only
In the table below I’ve done two things:
- Split Scotia Mocatta’s eligible warehouse movement figure from the first table above into an assumed eligible to registered transfer and the balance into an eligible other.
- Divided all ounce warehouse figures by 32.15. If the resulting amount is an integer (highlighted in purple) then it indicates the movement of kilobars.
I think the fact that the “eligible other” figures are kilobars strongly indicates that my blue “unknowns” were all eligible to registered transfers. It is also interesting that Scotia seems to deal a lot in kilobars in smallish quantities, at least during this snapshot on December. JP Morgan dealing in tonnes of kilobars is nothing new for my long-term readers.
