COMEX Available Gold Drops to All-Time Lows

The COMEX gold inventories available for delivery are at an all-time low – under 170,000 ounces. Why is this alarming?

First, the basics…

What is the COMEX? It is the primary market for trading metals such as gold and silver. It was formerly known as the Commodity Exchange Inc, but merged in 1994 with the New York Mercantile exchange.

What is the COMEX’s purpose? The Exchange offers their clients warehousing and storage options for metals such as gold and silver. The metals stored in these warehouses can be used to settle future contracts, can be transferred between clients, or they can be withdrawn from the warehouse. These warehouses provide clients, such as banks and large investors, a convenient way of storing their huge amounts of gold and silver.

The metals stored in these warehouses fall into two types: Eligible and Registered.

Eligible metals (for gold it’s 100-ounce bars) are stored on behalf of banks and private investors, but are not available for delivery for a futures contract.

Registered metals are the same as above except that these are available for delivery to settle a futures contract.

But here lies the problem…

An article by Hebba Investments for Seeking Alpha provides the chart below. It shows the dramatically shrinking amount of gold in the COMEX warehouses, especially the Registered Gold available for delivery to investors who write futures contracts.

There is only 1 ounce of registered gold for every 255 claims or contracts on that ounce! That is very little gold backing a large number of open contracts.

There seems to be little explanation from COMEX experts as to why this gold drawdown is happening. It may be that the amount of physical gold available for delivery is relatively tight and gold inventories may soon be gone. With these low numbers, it wouldn’t take much for a run on the COMEX with investors demanding their physical gold. At this point, the market wouldn’t be able to satisfy those requests.

For more charts and detailed information, watch this short video from Mike Maloney, author of the Hidden Secrets of Money video series.