Submitted by Craig Hemke, TFMetals:
Gold prices remain firm today…with the exception of the $5 drop at the London PM Fix…and they remain at a critical juncture. Price needs to extend higher here but total Comex open interest is back above the 500,000 level and, if recent history is any guide, that’s not a good sign.
Let’s start with the open interest numbers for yesterday as they were exactly as expected. On the $19 price surge, you knew that The Banks were in there, desperately attempting to keep things in check. To that end, The Criminals issued another 13,553 contracts of Comex gold yesterday. Again, these contracts represent an additional 1,355,300 “troy ounces” of paper metal and a future intent to deliver over 42 metric tonnes of gold. However, no additional gold collateral was deposited and no delivery is ever intended. Instead, The Criminal Banks issue this new paper in order to meet Speculator demand and thereby manage price from making fresh highs above $1264…and preserving their carefully-painted head-and-shoulder top:
So, what happens next? Well, it looks like price wants to break higher and I want price to break higher…but we have recent history working against us. Check this out:
DATE OPEN INTEREST NEXT DAY DROP
Mar 10 504,418 -$14
Mar 17 508,262 -$11
Mar 22 510,579 -$25
Apr 12 504,523 -$13
Apr 19 503,331 so far, so good
So, we’ll see. Like we’ve been saying, we need even more Spec fiat to flow into paper gold. This would force The Banks to take OI up to 550,000 and price would likely move to new highs near/above $1300. Now, what could/can/might entice enough new Specs onto The Comex to make this happen? Maybe the next set of FOMC Fedlines next week on the 27th? Maybe the release of the first guesstimate of Q1 GDP the next day? Maybe more crazy fun out of Shanghai? I don’t know. But we need some kind of catalyst…otherwise, The Banks will just overtly raid price again, forcing The Specs back out and dropping OI back toward 480,000.
Silver saw an open interest increase yesterday, too, but not much when you consider that price was up over 4%. Total Comex silver OI rose by 946 contracts to 194,510. Don’t misunderstand, though. This is still an extraordinarily high amount of open interest. The all-time high in Comex OI was set last June 23 at 200,273 and, less than two weeks ago, we were at 175,000. However, if you really want to get frustrated and angry, consider this:
Every Comex contract represents an opportunity to buy or deliver 5,000 troy ounces of silver. Therefore, when we do the math: 194,510 contracts X 5,000 oz/contract we get a total Comex “obligation” of 972,550,000 ounces of “silver”. And here’s your trivia question of the day…How much silver does the world produce every year? About 870,000,000 ounces. So The Comex silver open interest represents at 112% of total mine supply.
How does that compare to gold? Well, the world is projected to mine about 3,000 mts this year or about 96,000,000 ounces of gold. With each Comex contract representing 100 ounces, a total OI of 503,331 contracts equals 50,333,100 ounces or about 52% of total mine supply.
And what about platinum? A Comex contract represents 50 ounces of platinum and there are currently 60,387 of them floating around. This represents 3,019,350 ounces of paper platinum. And how much platinum does the world mine every year? About 178 metric tonnes or roughly 5.7 million ounces. So here the Comex also trades about 52% of mine supply.
Lastly, and just for fun, you might consider that total Comex copper open interest is 201,891 contracts. Each contract represents 25,000 pounds of copper. This yields a total of just over 5 billion pounds of copper. That may sound like a lot until you consider that the world produces about 41 billion pounds annually. So, The Comex copper open interest represents about 12% of total mine supply.
HAHAHAHAHAHAHAHA!!! Do you see a little bit of disparity here??? What would be the paper price of silver if open interest was cut in half to the level of gold and platinum? What would be the paper price if OI was reduced by 90% to the relative level of copper? And you wonder why I call the Bankers “criminals” and “thieves”, and why I call the Comex a “den of vipers” while using the terms “fraud” “scam” and “sham”.
So, anyway, before I start getting angry, I think I’ll just give you a couple of charts and then close out this post. Here are gold and silver. Again, gold needs a move through $1264 to ease some of my concerns. Provided gold holds in there in the short term, I still think that silver charges through $17.20 and heads to $17.70.
As I close, I see we’re at $1258 and $17.20.