Loading ...Gold open interest resumed climbing and is now 580,000 contracts and the highest since April 2022:
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The upcoming August contract, an active month, is in the middle of the roll period where open interest is typically declining by about 16,000 contracts per day. This typical reduction is due to traders closing the current contract and initiating a position in the incumbent month … in this case December.
However, the OI reduction over the last 2 days (July 15 and 16) has been nearly zero. Apparently new August positions are offsetting positions that have rolled. The OI for the August contract is now 265,000 contracts and slightly higher than average. There are 10 biz days to first notice, so there is plenty of time for the paper traders to roll, however this irregular OI trend could be an early indication of the propensity to stand for delivery. Perhaps some of those new contracts intend to remain for physical.
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You may recall that the most recent active month contract of June had a sharp rise in physical metal transferred … up 70% sequentially. Those 30,000 contracts is in the range of the huge delivery volumes in the aftermath of QE-infinity. The August contract could extend that momentum.
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The difference now is that registered gold is about 60% less than the peak vault totals during 2020 through early 2022:
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39% of registered gold transferred on the June contract. At some point deliveries will stress the physical market.
Again – it’s the physical market folks.
They buy it over here and take delivery in Shanghai.
Fireworks should ensue at some point.
Cheers all