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This analysis focuses on gold and silver physical delivery on the Comex. See the article What is the Comex for more detail.
Table des matières
Silver: Recent Delivery Month
Silver is wrapping up November delivery which is typically a much smaller month than even other minor months. As the chart below shows, delivery requests are below the last 5 minor months. That being said, notice the orange dot. It represents the percentage of contracts delivered relative to the max open interest for the month. It currently sits at 170%. This means that 70% more contracts have been delivered in November than were ever open at any point. Other months have shown similar moves, going above 100%, but not to the same magnitude.
Remember that “delivery” on the Comex does not necessarily mean the metal leaves the Comex vault. That data is tracked in a separate analysis, which has been showing a fairly large exodus of silver leaving Comex vaults in recent months.
Figure: 1 Recent like-month delivery volume
The delivery volume does need perspective, which is shown in the chart below. The major months still greatly outstrip the minor months (orange bars). The strength discussed above is not a gross delivery volume, but more about what transpires during the month. These are contracts that are opened mid-month to stand for immediate delivery. This specific metric is shown by the red bars below. Figure 3 shows a more detailed look.
Figure: 2 24 month delivery and first notice
The chart below focuses on the red bars above. After seeing several months of low and even negative contracts, the mid-month activity has picked up during October and November. The month of November currently sits at 741 contracts. This is below the 743 seen in March and the 783 seen in Jan 2020, but remember that November is not over. It could still set a record. Furthermore, it is more than double the 346 contracts from November 2020.
Given the last two large months were right before Covid hit the US (Jan 2020) and during the attempted Reddit silver squeeze (Feb and March), who is taking delivery of all this metal mid-month? More importantly, what are they anticipating?
Figure: 3 24 month delivery and first notice
Another promising sign is the historical view. Looking at the month of November over 10 years shows that this month is the largest on record from a dollar (notional) perspective. November precedes the year-end December contract, which is a major month in both gold and silver. Historically very quiet, but this November diverged quite significantly compared to previous years.
Figure: 4 Notional Deliveries
Who is scooping up all these contracts and will the momentum continue into December?
Silver: Next Delivery Month
The December contract is 3 trading days away from closing. There are 31k contracts open, but that is not atypical for this time of the roll period. The Thanksgiving holiday throws a wrinkle in things, but the current open interest is sitting below trend regardless.
Figure: 5 Open Interest Countdown
The major month trend has definitely been down in Silver. Each month getting lower than the next. Will December find a way to buck the trend? Given the recent mid-month strength, it’s possible. Stay tuned next week for the full analysis.
Figure: 6 Historical Deliveries
Cost to roll
One final consideration is the cost to roll contracts. This represents the spread between the current contract and the next major month contract. While it has drifted up in recent days, it still sits below the spread when delivery was occurring in much higher volumes during 2020.
Figure: 7 Roll Cost
Gold: Recent Delivery Month
The charts below follow the same order as the silver charts above.
November gold is a minor month, similar to silver. The lone exception was last November. The results are neither impressive nor disappointing. Delivery volume exceeded 3 of the last 5 minor months. Furthermore, the percent of max open interest that saw delivery (orange dot) sits at 158%. Not bad, but not exceptional.
Figure: 8 Recent like-month delivery volume
The mid-month activity (red bars) has shown strength, but this has been the trend of late. This month has seen 1,912 contracts open for immediate delivery. This is below the last three months of: 7,166, 2,678, and 2,656. It does exceed the three prior months from May to July.
Figure: 9 24 month delivery and first notice
Putting November into historical perspective shows it slightly above average but also well below the massive delivery seen last November.
Figure: 10 Notional Deliveries
Gold: Next Delivery Month
December gold is a bit more exciting being a major month. Unfortunately, the possibility for a Brainard nomination at the Fed did not materialize. This caused a massive (and irrational) sell-off in gold. Because the futures/paper markets dictate short-term price movements, this price drop manifested in closing long contracts. This resulted in the large drop in Open Interest seen in the countdown below.
As shown this was a massive liquidation. Gold open interest was running well above trend before the Powell announcement and is now running well below trend. Still, it’s too early to draw any solid conclusions. The last three days before roll are always interesting and a lot can happen.
Figure: 11 Open Interest Countdown
Similar to silver, the chart below shows the trend has been down.
Figure: 12 Historical Deliveries
Cost to roll
With the cost to roll also elevated, it may result in slightly more deliveries than what had been occurring, but will it be enough to reverse the trend?
Figure: 13 Roll Cost
December could prove to be a pivotal month. The physical demand for both metals has picked up since the lull over the summer. December could show whether the strong demand for physical is sustaining or waning.
The inflation in 2021 has been high but will likely get much higher in 2022. Major companies have been announcing price hikes for months. The CPI is now above 6%.
Physical demand in 2021 was high from a historical perspective but below the records seen in 2020. Even though price and physical demand lost momentum through Q3 2021, it’s hard to believe the demand won’t come back in a hurry if inflation doesn’t cool and the Fed is slow to act.
Figure: 14 Annual Deliveries
Data Source: https://www.cmegroup.com/
Data Updated: Nightly around 11 PM Eastern
Last Updated: Nov 23, 2021
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