How Much Silver Is Really Sitting In Comex Vaults?

Investment Research Dynamics

Can anyone answer the question with any modicum of certainty?  All published analysis on the Comex and the Commitment of Traders reports is based on the data reports compiled and issued by the Comex bullion banks – primarily JP Morgan, HSBC, Scotia.  All three of these banks have been embroiled in lawsuits and regulatory action in other areas of their business involving fraud and corruption.   The COT reports originate from these banks, who operate and control the trade clearing process at the Comex.

If the big banks who operate the Comex are reporting Comex Commitment of Trader and vault inventory reports accurately and honestly, it would be the only segment of their business operations for which they publish information and data that is not fraudulent to some degree, including their SEC-filed financials.  I believe that bona fide Comex data reports are a highly improbable propostion.  I would not bet on it.  Et tu?

All publicly available data used by analysts to write commentary is based on reports that are created for public consumption by the Comex bullion banks.   See a problem here?  Anyone?  Bueller?

Currently nearly every market “analyst” and chartist is calling for a big correction in the price of gold/silver based on two catalysts:  1) the big move in the metals since mid-January and 2) the massive bullion net short position in gold and silver vs. the massive net long position of the hedge funds on the Comex per the weekly COT report.

Historically, a position “set-up” like this has predictably led to what I call a “Commitment of Traders stop-loss long liquidation operation” implemented by the bullion banks.  The bullion banks know where the hedge funds have stop-losses set against their positions because the bullion banks are the entities that clear these trades on the Comex.

Typically the banks will set off stop-loss limit triggers on days when they are able to dump enough paper on the Comex to cause a “waterfall” drop in the price of gold/silver.  Thisoccurred on Monday morning, shortly after the p.m. price “fix” in London.  The “waterfall” drop on the chart is created when a significant number of stops are triggered, which forces the automatic selling of hedge fund positions.  (click on image to enlarge)

When a stop-loss long liquidation operation begins, it typically lasts several days, with large “shock and awe” price drops occurring over that period.  Most chart and technical analysts were issuing $14 price targets for silver last Friday.  As of Monday mid-day, it looked like those forecasts were almost certain.

But the current attempt by the banks to force-liquidate the long positions on the COT seems to have been stalled – at least for now.  After the hit on Monday, the metals bounced back to unchanged from Friday.  Yesterday, on a day when the SPX squeezed up over 2% – and the metals typically move inversely to stock market moves like that (“risk off”) – gold and silver jumped back up their pre-hit COT smash levels of early Monday morning. Another take-down attempt followed  and today the metals are once again in rally mode.   One wonders if Dennis Gartman and Clive Maund are scratching their heads at this point.

Everyone reading this is aware that the Comex inventory of gold and silver has been declining over the past several months, especially the metal that is declared to be “registered” (available for delivery).  Even more stunning has been the absurd spike in the ratio of paper gold/silver contracts vs. the amount of underlying physical metal declared as “registered.”

The fact that the corrupt bullion banks on the Comex are having trouble implementing their standard  procedural COT stop-loss long liquidation operation has lead me to question whether or not the Comex vaults truly have the amount of metal as reported.  Yet to be noticed or commented on,  the deliveries for the March silver contract so far have been unusually small.  This is because the “issuers” have not yet issued very many delivery notices.  Typically in a relatively large delivery month, like March, a lot of notices are issued in the first few days of the delivery period, which started Friday afternoon.  Why aren’t issuers sending out delivery notices in volume right now?

Currently there’s 3,440 open silver contracts representing 17.2 million ozs of silver.  In the first two days of the delivery period, only 32 notices have been issued.  JP Morgan and Scotia – no surprise there – have been the primary issuers and stoppers.  As of yesterday, the Comex vaults were reporting 24.7 million ozs in the registered account.

But are there really 24.7 million ounces of silver sitting in the registered account section of the vaults?   Yesterday over 1.7 million ounces of silver was removed from the eligible accounts.  None of it was moved into the registered accounts.  My guess is that there might be some “Charles De Gaulles” out there who are starting to wonder the same thing as me about the amount of silver actually sitting in Comex vaults.

With the Comex registered, “deliverable” inventory at a historic low,  a run on the Comex gold and silver “bank” would make things really interesting in the markets…