via PM board...ted butler comments on comex delivery problematic
Both gold and silver deliveries [on First Notice Day on Friday] were unusual, but in different ways. First gold. After the non-traditional delivery month of November, in which 200 contracts remained open for delivery for nearly the entire month, the delivery was completed on the last delivery day of November. That’s a simple fact that implies physical tightness in gold, as I have commented on recently.
The first notice day for December does nothing to eliminate the tightness premise in gold, as only 2 contracts were issued for delivery against nearly 8,000 COMEX contracts still open as of the close of business yesterday. Furthermore, JPMorgan stopped one of the two gold contracts issued, which usually means it will stop many more (as, and when, issued). Much can and will happen as this delivery month progresses, but at this moment, the most plausible, albeit preliminary explanation surrounding it is that physical gold looks tight.
Perhaps this is speculation, but I can’t help but feel, because the commercials have done such a remarkable job in reducing their total net short position over the past month by maneuvering the managed money traders onto the sell side of COMEX gold and silver, that this is the main plausible explanation in advance for a short squeeze in gold (and silver), tied to COMEX delivery circumstances. I know many point to the low levels of COMEX gold inventories and I do believe there is some truth in that; but when the commercials are favorably positioned for such a squeeze, as they are now, this positioning is many times more important. Much less important is, for some reason, the relative lack of public pronouncements that this current delivery period will be the one in which prices soar. Up until now, there were always widespread predictions of delivery squeezes that never came to fruition. — Silver analyst Ted Butler: 28 November 2015