The secret everyone needs to know about the COMEX

The recent crash of gold over the past week clearly indicates that strange things have happened. Because too many gold contracts have been sold, there are now more papers in circulation than physical gold is available. If only 10% of these contracts call for physical delivery, there is a possibility that the COMEX could collapse, according to Bill Holter of Miles Franklin LTD. Today, we live in a time where the price of paper is far above the physical trade between supply and demand, he tells SilverDoctors.

The number of open contracts went up by 13,000 as of last Friday. This was the beginning of the gold crash. Last Monday, another 10,000 open contracts were added. Despite this sharp increase, the gold price went down, because there were more sellers than buyers on the gold market. Yet, this cannot be the true reason for a falling price. In a market where panic reigns, the number of open contracts would go down, not up.

The number of gold contracts that are now on the market is no longer proportional to the amount of physical gold that the COMEX can deliver. If only 10% of all contract holders ask for their physical gold, the COMEX has already run out of stock. 

The fact that the number of open contracts increased indicates that there are parties that feel comfortable with their long contracts. If this party has very deep pockets and will withstand the margin increase, then the short contracts will have a big problem.