Comex gold contracts were brought to life in 1974. Correspondence between senior officials in, and advisors to, the Nixon Administration discussed the need to create an “investment” vehicle to “capture” institutional investment money directed into gold in order to prevent the rapid rise in gold after Nixon closed the gold window. If you are curious, the letters are posted in the GATA archive (GATA.org). For instance: LINK.
Since the introduction of paper gold, the Comex – gold and silver trading – has evolved into what can only be described as a caricature of a “market.” The open interest in gold contracts is nearly 10x the amount of physical gold reportedly held in Comex vaults; it’s 60x the amount of “registered” gold, or the gold designated as available for delivery.
Total open interest on the Comex as of last Thursday is 787k contracts representing 2,459 tons of paper gold. Global annual physical gold production is around 2,700 tons. The net short position of the Commercial trader category per the current COT report – “commercials” are primarily the banks which make markets on the Comex – is 134k contracts, or 418 tons of paper gold.
That the open interest in paper gold contracts is nearly equivalent to the amount of actual gold produced yearly by gold mines is an absolute joke. The purpose of the Comex, period, is to give the western Central Banks – primarily the Fed – the ability to control the price of gold. Based on the preliminary o/i report for Friday, the paper gold interest has spiked up to approximately 800,000 contracts.
But the good news is that rapid escalation of open interest in paper gold on the Comex is evidence that the banks are losing their ability to keep a lid on the rising gold price. Bill Powers invited me onto this Mining Stock Education podcast to discuss this issue, my outlook for the price of gold in 2020 plus some of my favorite mining stocks:
A few of the stocks I follow, recommend in my Mining Stock Journal and invest in myself have doubled or more since the May 2019. Several more are poised for big gains in 2020. You can learn more about Investment Research Dynamics newsletters by following these links ( a minimum subscription period beyond the 1st month is not required):
NOTE: I do not receive compensation from any mining stock companies and I do not accept any precious metals industry sponsors. My research and my views are my own and I invest my own money in many of the stocks I present.