This analysis focuses on gold and silver physical delivery on the Comex. See the article What is the Comex for more detail.
As reported last week, Comex January’s open interest activity was looking strong in silver and modest in gold. The initial results are promising, especially given the probability contracts will open mid-month for immediate delivery.
Table des matières
Silver: Recent Delivery Month
Silver has begun delivery for January which is a minor month. The chart below shows that 1,554 have been delivered so far with 547 contracts remaining in open interest. Given the current trend in contracts opening mid-month for immediate delivery (Figure 3), it is highly probable that January will be the biggest month since June.
Figure: 1 Recent like-month delivery volume
One positive trend is that the minor months are not seeing much drop-off in open interest coming into the close. That being said, January saw a slightly larger decline than the past few minor months, with 122 dropping in the final day. This compares to 32 and 24 in October and November. For comparison, December saw more than 4,000 contracts close or roll in the final day (difference between blue and green bar).
Figure: 2 24-month delivery and first notice
The red bars in the chart above represent contracts opened mid-month for immediate delivery. It can be hard to see, so the data is highlighted in the chart below. December saw cash settlements for the first time since July, both of which were major months in silver. If the current trend in minor months holds, at least a couple hundred contracts will open mid-month for immediate delivery.
Figure: 3 24-month delivery and first notice
Isolating the month of January over the past several years shows how this January stacks up to previous ones (dollar amounts shown). Given the number of contracts still open, this January will most likely be a record with well over $200M in silver delivered.
Figure: 4 Notional Deliveries
Silver: Next Delivery Month
February silver is another minor delivery month. Currently, open interest is actually trending very low relative to the last few minor months. It will be interesting to see if this picks up now that January has come off the board. Last February also had a slow start, but then caught a bid late in the contract which was the first month to really start the trend of accelerating into First Notice. Will history repeat?
Figure: 5 Open Interest Countdown
Gold: Recent Delivery Month
The charts below follow the same order as the silver charts above.
January gold has started very weak with only 1,045 contracts delivered and only 100 remaining open.
Figure: 6 Recent like-month delivery volume
On the final day, contracts increased by a modest amount: 7. Perhaps this is due to the recent uptick in gold prices into year-end.
Figure: 7 24-month delivery and first notice
If the price momentum continues, it’s very likely the mid-month contracts will open. The last two minor months as well as October saw more than 2,000 contracts open for immediate delivery. If similar activity is seen this month, it could potentially push January into one of the biggest minor months over the last year.
Figure: 8 24-month delivery and first notice
Looking at January for the last 10 years shows that this January is still below the last two. With contracts opening mid-month, it is very likely that this January could also be an all-time high similar to silver.
Figure: 9 Notional Deliveries
Gold: Next Delivery Month
February gold is a major delivery month. It’s currently on par with December, which was a very strong delivery month.
Figure: 10 Open Interest Countdown
The December delivery reversed a downward trend that has been in place since last February. It will be interesting to see if this February can keep the momentum going.
Figure: 11 Historical Deliveries
Cost to Roll
The cost to roll could also start to play a factor. It has been creeping up in recent months. Still below the months before April, but rising nonetheless.
Figure: 12 Roll Cost
The battle around $1800 has been raging since June. It would make sense why the price moves have become more volatile as December 31st approached, which represents a week, month, quarter, and year close. On Wednesday, it looked like the bears had achieved their objective of getting the price below the milestone. The bulls stepped in and have pushed prices to around $1825. At this point, it looks very likely gold will be finishing out the year on a strong note.
Has gold finally turned the corner? As Peter Schiff stated in his most recent podcast, 2021 was a fairly disappointing year for precious metals given the fundamental backdrop. This could change quickly in 2022, especially given the Money Supply setup that looks similar to 1972.
Tracking the data on the Comex could prove to be a canary in the coal mine and identify when investors really want physical metal. Looking deeper into the December data shows that it was actually an all-time record in one respect. Banks have never had to cover so many shorts from their house accounts. This will be analyzed early next week.
Figure: 13 Annual Deliveries
Data Source: https://www.cmegroup.com/
Data Updated: Nightly around 11 PM Eastern
Last Updated: Dec 30, 2021
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