Investors who own physical gold and the gold ETFs (GLD, PHYS, and CEF) may be interested in the continued drawdown of COMEX warehouse gold inventories that has been occurring over the last few months. We discussed this a bit in a previous article but what is interesting is that a month later, this drawdown is continuing without signs of letting up – even as the gold price has stabilized.
As you can see in the graph above, both registered and eligible gold stocks have been declining significantly since the beginning of 2013. We will take a closer look at these numbers but let us first explain the COMEX a little more for investors who are unfamiliar with it.
Introduction to Comex Warehousing
The COMEX is an exchange that offers metal warehousing and storage options for its clients. The list of their silver warehouses can be found here and their gold warehouses can be found here. In the case of silver and gold, the metal is stored at these official warehouses on behalf of banks and their clients and can be used to settle futures contracts, transferred between clients, or withdrawn from the warehouse. This offers large holders of precious metals a convenient way to store their metal with minimal storage fees – very convenient indeed if you hold large amounts of gold or silver and you don’t want to store them in your basement.
Silver and gold stored in these warehouses can fall into two categories: Eligible and Registered.
Eligible metals are those that conform to the exchange’s requirements of size (1000 ounce bars for silver and 100 ounce bars for gold), purity, and refined by an exchange approved refiner. Eligible metals are stored at COMEX warehouses on behalf of banks or private parties, but are not available for delivery for a futures contract.
Registered metals are similar to eligible metals except that these metals are also available for delivery to settle a futures contract. COMEX issues a daily report on gold, silver, copper, platinum, and palladium stocks, which lists all the metal that is currently stored in COMEX warehouses and how much eligible and registered metal is present.
This information allows investors insight into how much metal is currently backing COMEX futures contracts, what large gold and silver owners are doing with their metals, and how many clients are requesting delivery of their metals. There is a lot more to glean from this information, but for the purpose of this article we will focus on the gold drawdown.
Gold Continues to Leave the COMEX
Before we look at the numbers we have to give a plug to the folks at Troy Oz Gold, who provided important data that helped to contribute to this article. Their site is free to use and provides investors with terrific information about COMEX inventories, ETF inventories, and a lot of other data about everything related to the gold and silver markets – investors should check it out.
Let us now take a deeper look at the gold drawdowns being seen in the COMEX warehouses.