Comex Countdown: What’s Really Going on With Silver?

by Peter Schiff, Schiff Gold:

This analysis focuses on gold and silver physical delivery on the Comex. See the article What is the Comex for more detail.

Silver: Recent Delivery Month

Silver is wrapping up June which is a minor-month contract on the Comex. Delivery volume was modest, beating out the last minor month (April), but falling behind both Jan and Feb. In terms of OI delivered at the max point in the period (orange dot), June will be the lowest month since last October.


Figure: 1 Recent like-month delivery volume

Much of this is driven by mid-month activity, or the lack thereof. As shown below by the green bar, June went into First Notice quite elevated but has then seen much smaller mid-month activity (red bar).

Figure: 2 24-month delivery and first notice

At this point in the contract, most of the mid-month activity should have taken place. You can see below how much this month is lagging behind prior months (red line below).

Figure: 3 Cumulative Net New Contracts

The house accounts are also noticeably quiet when compared to recent months. BofA took two months off after being extremely aggressive Dec-Mar. They have been nibbling this month, but the remaining house accounts are having their quietest month in either direction since Oct 2020.

Figure: 4 House Account Activity

Silver: Next Delivery Month

Jumping ahead to July (a major month) shows silver way below trend in terms of open interest.

Figure: 5 Open Interest Countdown

The last major month (May) also saw a collapse in delivery volume when compared to December and March.

Figure: 6 Historical Deliveries

When looking at the commitment of traders’ report, interest in silver from Managed Money is at multi-year lows. Total open interest is also near the lowest levels since 2014 if you ignore the flash crash in March 2020.

So, what gives? Has silver been left for dead? Not quite. There have been articles showing that silver could have gone into a technical default earlier this year. The theory states that too much delivery volume overwhelmed actual supplies and off-market deals were done to settle contracts. Since then, the major players have left the market to make it look like the market is dead. No pulse. Nothing to see here.

Looking at a few other data points shows there is more activity going on under the surface. First was the 12 standard deviation event that took place right around the potential default.

Second, the stock report shows that more and more metal is leaving Registered (metal available for delivery). After seeing a major surge in March around the technical default, Registered has seen a steady depletion of metal. More than 22m ounces have been taken out since the peak. Metal is flowing into Eligible which is not available for delivery.

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