• BullionStar
    05/30/2016 - 21:24
    The US Gold Market is best known as the home of gold futures trading on the COMEX in New York. The COMEX has a literal monopoly on gold futures trading volumes worldwide, but very little physical...

There Are Now 293 Ounces Of Paper Gold For Every Ounce Of Physical As Comex Registered Gold Hits New Low

Tyler Durden's picture


Unlike Bitcoin, which has doubled in the past few weeks (as the predicted Chinese buying onslaught indeed materialized), it hasn't been a good week for spot gold prices which have tumbled from $1,180 to just over $1,100. While the reason for the selling is unknown, with recurring speculation that an imminent Fed rate hike will make holding gold even more unwelcome in real terms (if not in India where gold now pays interest on par with inflation), what we do know is that as of yesterday the total registered gold at the Comex had dropped to a fresh record low following another transfer of "registered" gold into "eligible."


This reduced overnight the total amount of eligible gold by a third to just over 151,000 ounces, or under 5 tons as the zoomed in chart below shows.


And since the gold open interest continues to rise modestly...


... this means that as of today, the gold "coverage" ratio, or the amount of paper claims for every ounce of physical, has just hit a new all time high of 293 ounces of paper per ounce of registered physical.


Curiously, the last time we observed a comparable surge in the Comex dilution ratio took place just two months ago when a comparable "adjustment" reduced JPM's "Registered" inventory by 122,124 ounces. Back then many said the adjustment would be promptly reversed.

Two months later not only has that not happened, but JPM is now down to just 10,777 ounces of Registered while many other vaults continue to see either outright withdrawals or comparable adjustments.

How much longer can this exponential surge in the dilution ratio continue? We don't know, although with less than 5 tons of registered gold left in the Comex vault system, we hope that the mystery of what is really going on at the Comex will finally be unveiled.

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Wed, 11/04/2015 - 18:44 | 6750748 PoasterToaster
PoasterToaster's picture

Aren't naked shorts illegal?

Wed, 11/04/2015 - 18:49 | 6750778 Johnny Horscaulk
Johnny Horscaulk's picture

For you and me?



Wed, 11/04/2015 - 18:52 | 6750792 J S Bach
J S Bach's picture

Hmmmm... so let's see...

If everyone owning gold on the Comex demanded their physical gold at the same time - that would be $1,150 X 293 which means that each ounce of actual gold would be worth $336,950.  I know... it doesn't work that way, but it's fun to think about.

Wed, 11/04/2015 - 18:55 | 6750804 LawsofPhysics
LawsofPhysics's picture

Yes, hence, Brazil maybe the only country doing even remotely honest accounting...

Wed, 11/04/2015 - 19:14 | 6750908 philipat
philipat's picture

"While the reason for the selling is unknown"

Beg to differ. The reason for the selling is perfectly well known, it is the Commercials putting the Managaed Money through the "Rinse" cycle, by covering their (Receord) Short positions as they nydged the price down below the imprtant Moving Average and the Spec Algos then started selling in volume.

Wed, 11/04/2015 - 20:43 | 6751437 strannick
strannick's picture

That ratio will start moving down once Venuzuelean gold starts coming into the vaults.

Wed, 11/04/2015 - 23:46 | 6752217 Soul Glow
Soul Glow's picture

Still haven't gotten the Syrian gold though....

Wed, 11/04/2015 - 19:28 | 6751020 Anopheles
Anopheles's picture

Your article is largely bullship

"I would say gold is one of the least volatile assets"


The past 10 to 15 years the value of gold has fluculated by 700%.  Sure it went up, but also went down substantially (and it's not finished yet)

It's simply an asset that has almost no utility, produces no returns, and there are huge worldwide stockpiles of it, and it's value is determined by greed and purchaced as a luxury during good economic times. 

Wed, 11/04/2015 - 19:42 | 6751093 Tinky
Tinky's picture

You're giving morons a bad name.

Wed, 11/04/2015 - 20:19 | 6751322 Anopheles
Anopheles's picture

I didn't intend to single you out...... 

Wed, 11/04/2015 - 20:46 | 6751453 strannick
strannick's picture

At least with government fiat you can wipe your ass with it when it reaches its intrinsic value.

Do you also use the same utilitarian criteria of value when describing books and paintings? 

You do realize gold serves as symbolic substutionary exchange yes?

Wed, 11/04/2015 - 22:09 | 6751558 Anopheles
Anopheles's picture

Books no, paintings yes.

Except a painting isn't a commodity like gold, where evey one (oz) is identical to the next.

As for fiat, of course it will go to zero.   It's a medium of exchange, not a commodity.  If you want to hold on to your fiat until it's worthless, you get exactly what you deserve.  However with fiat, as it depreciates year over year, you also earn more year over year.     Or do you still work for a 10 cents an hour like they did in 1860 and the dollar was still worth "something". 

Wed, 11/04/2015 - 23:19 | 6752134 Oracle of Kypseli
Oracle of Kypseli's picture

I am wondering why your writings and your handle are anopheles which means:

an?phel?s = unprofitable, useless.’



Thu, 11/05/2015 - 02:34 | 6752585 Bay of Pigs
Bay of Pigs's picture

it means parasite and mosquito too...maybe Tyler is trolling.

Thu, 11/05/2015 - 02:01 | 6752535 Squid-puppets a...
Squid-puppets a-go-go's picture

you do realise that gold's relative lack of utility (aside from jewellery which is a proxy for bullion) is precisely what makes it useful for backing an economy's monetary system?

If it was used for a bunch of other stuff, its demand/supply would fluctuate more ad it would be less suitable

Wed, 11/04/2015 - 21:06 | 6751543 pickatheweek
pickatheweek's picture

When pricks like you learn that fiat isn't exchanged for food you're sunk baby but I'll have bread on the table.

Wed, 11/04/2015 - 21:14 | 6751569 Anopheles
Anopheles's picture

I'll be the one selling you that bread.  And a dozen loaves of bread will "cost" you an oz of gold. 

Don't like the price?  Shop somewhere else.    What's that you say?  Nobody else has bread?  OK, the price just went up. 

Thu, 11/05/2015 - 10:41 | 6753355 Dethrone The Ba...
Dethrone The Banksters's picture

How about a few rounds of lead for that bread --- in the skull 

Wed, 11/04/2015 - 22:26 | 6751934 Rearden-Steel
Rearden-Steel's picture

Warren is that you?

Wed, 11/04/2015 - 23:00 | 6752057 OceanX
OceanX's picture

"It's simply an asset that has almost no utility"

Never corrodes and makes a nice radiation shield...

Thu, 11/05/2015 - 16:24 | 6754830 vespa330
vespa330's picture

That's too funny. I can buy your house or 1 share of the Dow for less ounces of gold today than in the year 2000. Strange asset indeed.

Wed, 11/04/2015 - 18:58 | 6750823 NoDebt
NoDebt's picture

Funny how COMEX works like fractional reserve banks of old.  Gold in the vault, paper claims out on the street.  But that's a pretty damned big "money multiplier" or a very small "reserve ratio", if you prefer that term.  They mean the same thing in this context.


Wed, 11/04/2015 - 22:32 | 6751951 Rearden-Steel
Rearden-Steel's picture

Old man Yellen's going to get away with it too if it isn't for that meddling natural law.

Wed, 11/04/2015 - 18:59 | 6750826 Squid-puppets a...
Squid-puppets a-go-go's picture

its more fun to think of it this way:

Any oligarchs who want to break ranks, sit on a chair first, and ride gold to the stratosphere need only front up $170 million between them and their collaborators, ask for immediate delivery, and the comex vampire is slain

Wed, 11/04/2015 - 21:01 | 6751519 Stuck on Zero
Stuck on Zero's picture

Squid ... You cannot hurt the COMEX in this manner.  They reserve the right to cash out all delivery requests at the market rate. 

Wed, 11/04/2015 - 23:41 | 6752203 Hugh G Rection
Hugh G Rection's picture

Even if it were the case, any oligarch attempting that would soon find some democracy dropping through the roof.

Thu, 11/05/2015 - 02:03 | 6752541 Squid-puppets a...
Squid-puppets a-go-go's picture

yes yes but their ability to settle with cash is immaterial - the event that they ARE settling in cash tells the investment community to hang on to their phys gold for a MUCh higher price

a new pricing mechanism will have to prevail, and theres nothing comex can do about that.

Enter the dragon

Wed, 11/04/2015 - 19:33 | 6751046 Anopheles
Anopheles's picture

But they DON'T want their physical gold.   Because if they did take possession, that means they would have to PAY for it.  They don't want to pay for it, they just want to PLAY with it. 

Can you imagine what would happen to our entire economy if everyone had to fully pay for everything they own, BEFORE they take possession?  The economy would grind to a halt.   Imagine buying a new car when you have to bring in $50k in cash.  Or $500k for a house. 

Wed, 11/04/2015 - 20:30 | 6751357 wet_nurse
wet_nurse's picture

Yeah, just imagine. How would the banks get rich then? 

Wed, 11/04/2015 - 20:30 | 6751358 Not My Real Name
Not My Real Name's picture

An ounce of gold is barely $1100. What's the problem?

Thu, 11/05/2015 - 02:04 | 6752542 Squid-puppets a...
Squid-puppets a-go-go's picture

what is it about debt being the forwarding of future consumption that you dont get?

Wed, 11/04/2015 - 18:52 | 6750797 kliguy38
kliguy38's picture

make me vethy happy.........cheap gold and take possession........can it get any better

Wed, 11/04/2015 - 20:00 | 6751197 ersatz007
ersatz007's picture

"Aren't naked shorts illegal?"

Silly rabbit, laws are for plebes

Wed, 11/04/2015 - 18:49 | 6750779 Save_America1st
Save_America1st's picture

"The reason for the selling is unknown."???


HAHAHAHA....That's a good one!

Wed, 11/04/2015 - 19:06 | 6750853 Kaiser Sousa
Kaiser Sousa's picture

"we hope that the mystery of what is really going on at the Comex will finally be unveiled...."

fuck hope...let me learn ya with 2 words....


and still i and many others will not be moved...


Wed, 11/04/2015 - 19:10 | 6750897 FreeShitter
FreeShitter's picture

I feel better after the DTTM sig.

Wed, 11/04/2015 - 18:50 | 6750784 HungryPorkChop
HungryPorkChop's picture

Illegal?  Not if they are blind and created out of thin air with no backing whatsoever.  In that case, they are perfectly legal to make waterfall trades, rig markets and cap prices without limit no matter if you ever owned a real ounce of gold or not.  Were those the blind naked shorts which you referred?

Wed, 11/04/2015 - 18:53 | 6750799 J S Bach
J S Bach's picture

Clothed shorts are illegal.  Naked ones are just fine.

Wed, 11/04/2015 - 18:45 | 6750754 devo
devo's picture

Gold to 800.

Wed, 11/04/2015 - 18:49 | 6750777 LawsofPhysics
LawsofPhysics's picture

Yes, and just like oil taking delivery at the "official" price will be something else altogether...

Wed, 11/04/2015 - 19:13 | 6750840 Tall Tom
Tall Tom's picture

The price of any unenforcable, non performing contract approaches the same value as Monetary Velocity will approach in a dying economy.


In fact it needs be expected as when no product is available for trade...THEN THERE IS NO ECONOMY.


It is actually causation rather than correlation.


The price for a Gold Futures Contract will approach ZERO.

Wed, 11/04/2015 - 18:47 | 6750761 gcjohns1971
gcjohns1971's picture

If the Commodities Markets were functioning, that would imply the price ought to be 293 times what it is.

But of course, the 'synthetic' or 'naked' trading happens on both the sell and buy side.


Commodities futures exist to hedge COMMODITIES. 

They do not exist to hedge CURRENCY.

Having so many naked traders defeats the purpose of the market, leaving it a useless shell.

Wed, 11/04/2015 - 19:35 | 6751049 herkomilchen
herkomilchen's picture

that would imply the price ought to be 293 times what it is

No.  The amount of gold COMEX holds in its vaults has nothing to do with the amount of gold held by sellers in outside vaults.  With a little hassle that outside gold can be registered into the COMEX vault for delivery to settle contracts.   So the 293:1 thing is much ado over nothing.

The only way to assess the extent of naked and rehypothecated shorting would be to take an accurate inventory of the physical gold sellers actually have along with its comprehensive hypothecation status and validity of sellers claim to it.  I.e., information that's completely impossible to obtain.

More info on the COMEX process here:


Wed, 11/04/2015 - 19:50 | 6751144 taopraxis
taopraxis's picture

In theory, I agree with you...in practice, I do not think you will get delivery of real gold in a pinch but I could be wrong.

Wed, 11/04/2015 - 20:00 | 6751206 herkomilchen
herkomilchen's picture

I didn't say people would get delivery.  I said the COMEX gold ratio tells you nothing about whether they will get delivery.

The COMEX vault is like your dinner plate.  Just because it only has a little bit of food on it, doesn't mean there isn't a big serving dish in the kitchen loaded with more food than you can eat.  Or not.  We don't know.  Because we can't see into the kitchen.

Wed, 11/04/2015 - 20:10 | 6751269 taopraxis
taopraxis's picture

In theory, I agree...but, what has changed? Why is the ratio so small relative to the past?

Wed, 11/04/2015 - 22:57 | 6751679 herkomilchen
herkomilchen's picture

The article I linked to explains that rising prices incentivize hoarding of larger stocks while falling prices incentivize dishoarding them.  The chart on that page illustrates why gold stocks continue to fall right now - because price is falling.

ZHers misunderstand what COMEX warehouse stocks actually are.  They are not collateral backing anything.  They don’t necessarily belong to anyone holding open sell contracs. They are merely working inventory used by their owners, to provide a physical gold liquidity service to enable physical possession transfers.  A service for those contract sellers who actually do want to get rid of physical and those who actually do want to take possession, including arbitrageurs.  The number of bars needed to have on hand to provide that liquidity service depends on the volume of physical transfers expected in any given delivery month.

We may not like it, but the reality is COMEX does not require sellers to hold any stock in its warehouse at all.  Zero. Zilch. Nada. Only that they be legally liable to produce it on demand.

Consequently, unless there was some profit in doing so, why would anyone tie up any more of his gold than he has to in COMEX registered status, which is more expensive than storing it in other warehouses.  Registered stocks sitting in COMEX that aren't actually being used for COMEX settlements every month are a waste of money to maintain.

I'm under no Pollyannish impression the JPMs of the world aren't taking advantage of this fact by naked selling and rehypothecating up to their eyeballs.   But at the same time I know JPM controls massive gold stocks it just stores elsewhere.

If all the COMEX physical gold was cleaned out for delivery tomorrow, more would just rush in to take its place via pullthough.  Sellers would quickly pay higher premiums to entities supplying needed COMEX registered gold.  JPM and many other entities would step up to pocket that premium, and supply would be shifted from other places to meet COMEX demand.  There are many tonnes more physical gold out there in other warehouses and other forms like the ground able to come into COMEX promptly if paid to do so.  The gold that happens to be actually sitting on COMEX shelves at the moment is but a buffer between COMEX and all that other supply.

Thu, 11/05/2015 - 02:07 | 6752549 Squid-puppets a...
Squid-puppets a-go-go's picture

where does JPM store it? Because as far as im aware they have to declare their holdings in daily reports - the same ones showing they have less than 5 tonnes between the holding banks

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