Is COMEX Cracking? Finally?

Many of us, myself included, thought COMEX silver might go bust last December. It inspired me to start tracking COMEX silver deliveries, thinking shortages may show up there first. [Vaporize COMEX countDOWN]

COMEX fooled me. [Gunther Asks If I’m an Idiot]

Most “deliveries” were not physical deliveries depleting COMEX’s metal reserves. They were really just moving a pile of metal from one bank’s hoard to another. So, I changed to just charting weekly changes in COMEX gold and silver inventory. [Charts: COMEX Gold & Silver] Gold inventory dipped through December, then recovered nicely. Silver, on the other hand, dipped and stayed, mostly, down.

Hmmm.

Now, no less an expert than Ted Butler [hero] is saying today:

tedbutler_sm“What’s somewhat ironic is that there was a tremendous amount of discussion over the past few months about backwardation and potential delivery troubles in the past December contract. None of those threats came to fruition.

“Now, with very little public discussion or warning, delivery tightness and backwardation seem to have arrived.

What’s this “backwardation” Ted’s talking about? 

“The main micro sign that we may be entering into a wholesale silver shortage is the appearance of an inversion or backwardation on the COMEX. For the past week, the nearby current delivery month of March has closed at a premium to the next major delivery month, May.

“What this means is that buyers are willing to pay more to get immediate delivery of wholesale quantities of silver. It means wholesale silver is “tight.”

It sounds like things may be heating up in silver…

See also:
COMEX Crimes: Your Tax $ at Work

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7 Responses

  1. Scott,
    I have been following your website for some time along with Sinclair and enumerable others. I think you do a great job and I find your musings incredibly infromative. I’ve never traded futures on the comex but this whole comex cracking/failure to deliver thing puzzles me a great deal. As best I can tell, if someone wanted to bust the comex couldn’t they just go long an unlimited amount of futures and then just ask for delivery? The total dollar amount of all registered comex inventory is only about $3B which for many wealthy oligarchs, sovereign wealth funds, or potentially hostile countries is but a drop in the bucket. Is there something I’m missing here? People seem to get excited about the comex potentially failing and it very well could but it seems that it wouldn’t be very difficult if anyone really wanted to. Again, perhaps I’m oversimplifying but I think getting a clear understanding is very important so people aren’t mislead in their understanding of the process and in any investment decisions regarding the precious metals skyrocketing if and when the comex collapses. By the way, I am incredibly bullish on both monetary metals and am a firm believer in abolishing the fed, a return to sound money, etc., etc. etc. I’d love to hear your thoughts on this issue when you have a moment as it would probably be educational for me and many other of your readers.
    Thanks so much and keep up the great work,
    Mike

  2. I wish the public would just go around the comex. declare it a joke. An just have a huge world wide auction on the internet. Ebay like trading looking good but only trade PM
    Start by having all metal miners sell there PM there. an the comex would dry up in a hurry. An iam very sure the price of gold silver would skyrocket. No goverment control. No toilet paper trades. No future promises of metal in the ground. Have the metal in site an cash to buy. All other comodities would go down in price. More money to be made in pm. An when gold silver rise 10% to 10,000%. An who gets hurt in this play. Would the dollar lose? Would this cause massive inflation? The dollar would actually be worth more. pms would be chasing to make cash out of there pms.

  3. “Is COMEX Cracking? Finally?”

    I would say COMEX has been cracked for some time now. What’s puzzling to me is why anyone respects it. If I were a gold miner, I would sell to the highest bidder and forget COMEX and the COMEX price. Last I looked, over 50 million (naked?) ounces of gold were shorted – that’s 2/3 of a full year of world wide production of the stuff. I suppose some folks are going long on COMEX because they can’t buy real gold. Miners need to get smart and start minting their own coins and bars for sale.

    The reality of what the financial authorities are doing is killing the world’s economic system. Bernanke says the world will come out of this recession in 2010. For how long???? If the world’s economy picks up, what will happen to commodity prices? They will go through the roof of course. Why? Significant under investment for far too long because of suppressed prices. The mining industry is a mess. Too few professionals around to do much. So, what will happen when prices go through the roof??? The world’s economy will quickly collapse once again because of the high cost of everything. All the critical commodities are in short supply, making any sustained economic recovery a pipe dream.

    Simply putting more money into the system will not fix anything. All it will do is delay for a short while the inevitable. And the inevitable is that permanent economic health cannot be restored until all things come back into balance – manufacturing, commodity supply and monetary supply. And quite frankly, all three of them are way out of whack right now….

  4. Scott,

    Check this out http://www.bloomberg.com/apps/news?pid=20601087&sid=aHvAYQmtkaAQ&refer=home

    Barclays controls the SLV ETF, They are trying to sell, I wonder why?

    Do you see the rats scurrying from the sinking ship that I do?

    Thoughts?

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