Loading ...With mines, mints, and refineries closed around the world due to coronavirus, the demand for physical gold has blown through the roof. This has led to some drastic measures by the CME Group, which in turn may have unwittingly sealed the fate of the COMEX and the entire fractional reserve and digital derivative pricing scheme.
This latest crisis began last Tuesday, when the spot market for gold appeared to seize up as the futures price roared ahead following the announcement of formalized QE∞ by the U.S. Federal Reserve. The event has been chronicled by many analysts and experts, with even Reuters and Bloomberg joining in the reporting.
• https://www.reuters.com/article/us-gold-trading-cm…
As the Reuters article notes, a clear shortage of the COMEX standard 100-ounce bars had developed. To counter this— and in a desperate attempt to maintain the integrity of their trading system —the CME Group immediately responded by amending the delivery procedures of their standard COMEX contract. Instead of the required 100-ounce bars, the COMEX would now be able to deliver fractions of 400-ounce London Good Delivery bars as well.
• https://www.cmegroup.com/trading/metals/precious/faq-gold-enhanced-delivery-futures.html
First of all, this exposes the charade of what has always passed for the bi-monthly physical settlement process on COMEX. Oh sure, the COMEX vaults may have always shown 8,000,000 ounces of gold, but quite obviously, none of that was actually available for physical delivery. Instead, each delivery month consisted of simple journal-entry transfers of nothing but warrants and warehouse receipts. To maintain the charade, one bank would issue some “gold” and another would take delivery. We’ve written about this scheme on countless occasions, most recently here:
• https://www.sprottmoney.com/Blog/the-continuing-comex-fraud-craig-hemke-05-112019.html
But, whatever. Let’s get back to the crux of the matter.
Obviously, the CME Group knew that they had a problem on their hands last week, which is why the sudden rush to amend the COMEX delivery rules to allow for London bar usage. The current front and delivery month is the Apr20, and that contract was due to go “off the board” and into delivery yesterday, Monday, March 30. Due to the virus-related shortages, The CME clearly anticipated a sudden surge of demand for actual physical delivery in April.
And did they ever get it! As of the COMEX close on Monday, the total amount of Apr20 contracts still open and “standing for delivery” was 25,595! A usual/normal delivery month on COMEX usually sees 8,000-10,000 “deliveries” for up to 1,000,000 ounces of warrants, etc. For Apr20, however, there is a request for 2,559,500 ounces, and because of the current shortages, most of these contract holders actually want real, physical metal.
https://www.sprottmoney.com/Blog/the-cme-opens-pandoras-box-craig-hemke.html