Posted 10 months ago | by Ben Armstrong
COMEX Turns into Gold Vacuum – Why the Wall St. Gold Rush?
Investors tend to look at price first – but the volume of market moves can be a much more important factor – especially when it comes to the physical delivery of a commodity.
While the US has been a precious metals trading mecca for a century, the post WW2 gold trade was largely done on paper. Big banks could care less about physical delivery, and most funds were (and still are to some degree) happy to hold paper promises for physical metal.
2020 seems to be changing long-standing ideas, and the precious metals market is no exception.
All of this seems like a great thing for decentralized assets, as well as tokenized metals that can be traded via popular blockchains.
Tons of Gold Flowing to the USA
So lets start with the sheer volume of gold flowing into US COMEX warehouses. Since bailout madness 2020 began, more than 800 tons of gold has been imported (basically from London) and the amount of gold in stock has swelled by more than 400% to over 1100 tons.
To put that amount of gold in perspective – the Swiss government has around 1,040 tons of gold, and Japan is sitting on less than 800 tons in official reserves. The move up in US physical gold supplies is striking, and a historical abnormality.
Send Whatever You Have
As a result of the US commodity market's ravenous appetite for physical gold, the types of delivery bars that are now acceptable have been expanded – and by a substantial amount.
Until 2020 began, COMEX would only accept a few different kinds of gold and silver bars to fulfill delivery obligations for futures contracts. Needless to say, most of what was traded in London wasn't going to cut it for COMEX delivery.
In July of this year – the types of both gold and silver bars accepted by the COMEX for delivery were expanded – by more than 150 types.
Now you can use just about whatever kind of bar you have – as long as it is gold or silver – and it didn't come from North Korean refineries for COMEX gold settlement.
The US financial establishment is hungry for gold, and it shouldn't be a surprise that it all began when the FED decided to add trillions of USD to its balance sheet in the space of a few months.
Maybe They Still Don't Get It
Gold and silver are great. I think they are both amazing assets. The problem is – established players tend to be behind the curve when it comes to technology and social trends (prove it is viable and I will invest).
The thing is, digital assets like cryptos have a LOT of advantages over physical metals. For one thing, it is a lot easier to travel with $1 million in Bitcoin than it is with the same amount of silver (invest in a sherpa).
The same thing is true for making payments or selling your holdings.
Once you spring for a pile of 1,000oz good delivery silver bars – well, lets just say that your pool of potential buyers is fairly limited. For what its worth, the COMEX is taking most kinds of silver bars, so if you need to get rid of some – there is a buyer in the US who is waiting for your metal.
With cryptos, making payments is a lot easier. The network doesn't really care if you are sending $100 or $1 million in BTC, the network fees will be higher on a larger transaction, but it isn't nearly the same deal as working with physical metal.
Suffice it to say, we are likely in the opening stages of a massive bull market in digital assets. As major institutions wake up to the fact that they have trusted government currency (yes the FED is private, but not really) for WAY too long, decentralized assets should catch an epic bid.