Physical demand is up at comex as 28% of registered gold transfers on the August contract. Meanwhile September open interest is now more than 2x average.
Plus, BofA bails out a 220,000 oz naked short on the August SILVER contract.
August 23, 2024 3:05 PM
++++++++++++++++ Silver
BofA likely bailed out a short on the August silver contract to the tune of 44 contracts (220,000 oz). While that isn’t a huge number, it is indicative of the state of supply at comex and the propensity of shorts to gamble with a naked position.
Here’s the logic … open interest on the August contract had been stuck between 46 and 50 contracts since August 13 until this morning, an 8 trading day period. In the meantime 98 new contracts were written and (it appears) delivery notices were issued on those new contracts as OI remained stuck in that narrow range. Next on this morning’s (Aug 23) Issues and Stops report BofA issued 44 delivery notices which knocked the open interest down to just 3 essentially settling most of the outstanding contracts.
It’s very late in the contract for banks to be settling shorts … especially for BofA which has vast stores of silver. Last notice day is next Thursday (Aug 29) and it is not typical that BofA would be delivering metal this late in the contract as bankers typically settle shorts in the first days of the delivery period. Furthermore, BofA hadn’t sold or bought ANY silver on this contract which makes this sudden issuance of delivery notices all the more suspect.
Moving on to the upcoming active September contract … OI is 40,800 or 18% below the mean with 5 days to first notice.
++++++++++++++++++ Gold
Following up from my prior post … it appears that it WAS Citibank’s house account who bailed out a naked short to the tune of 328,500 oz (10.2 tonne) on August 16. The link to that piece is as follows:
Graphically the delivery notices are shown in the following plot and you can see the Citi anomaly late in the delivery period at August 16:
Cumulative total delivered gold to date is 22,033 contracts (68.5 tonne) which is the second highest in the last 12 months continuing a strong rebound from lows in late 2023:
Now that deliveries have rebounded AND the gold vaults remain drained, deliveries as a fraction of registered are now near record highs.
Gold delivered on the August contract so far is 28% of registered which is the third highest over the last 4-1/2 years and only bested by June, 2024 (the prior active month contract) and August 2020 (which was during the QE infinity hysteria). See that on the plot below. I’ll have to make a plot showing this fraction through time. Look for that soon. Due to that oversite, this post is free.
Also notice the anomalous late bump due to the CitiBank bailout.
Switching to the upcoming inactive September gold contract … open interest is at a record high of 5,483 with just 5 days to first notice. That OI is more than double the average of 2,460 contracts at this point in the cycle.
OI made a huge jump on 2 back to back days, July 29 and 30, where it added 2,304 contracts and 1,258 respectively. That’s a total of 3,562 contracts (11.1 tonne). The net new contracts on July 29 were the 3rd largest during the pre-delivery period as you can see on the plot below. And the 2 day total is the highest during (at least) the last 4-1/2 years although that isn’t as obvious from the plot below.
The OI trend is as follows and tops all other contracts by more than 1,000 at this point in the cycle:
Nothing spectacular happened price wise on those 2 days as prices were within a $30 range. I’m going to guess that it was a mostly two players (one long and one short) who took those positions. If so, it’s going to be interesting to see who they are.
Thank you Ditch.
Death by a thousand cuts is finally paying off