Is There A Looming Physical Gold Shortage?

| July 22, 2013 | 0 Comments

COMEXPrecious metals markets are starting this week off with a bang.  First off, gold is surging above $1,300 an ounce.  At last check, the yellow metal is up $41 or 3.19%.

At the same time, silver is retaking the all-important $20 level… 

As you know, the lustrous metal had a disastrous first half of the year.  But with the metal trading at multi-year lows, value buyers are starting to step in.  Bargain hunting is pushing silver up $1, or 5.8%, in today’s trading session.

Why such a dramatic price revival to start the week?

Numerous reports are surfacing about looming shortages in the physical gold market. 

And as a matter of fact, COMEX registered gold inventories are quickly dropping to their lowest levels on record.

As you may know, COMEX offers precious metal warehousing services for banking, institutional, and other large customers.  In a nutshell, the COMEX is an efficient way for privileged clients to store, transfer, and take delivery of precious metals.

And speaking of taking delivery…

Gold inventory at the COMEX is falling through the floor

In fact, as of last Friday’s report, just 950,441 ounces of registered gold remained at the COMEX.  That may seem like a lot, but it’s actually down 60% from the 2.3 million ounces of registered gold held by the warehouse at the start of 2013.

What’s it mean?

Physical gold is leaving COMEX vaults at a staggering pace.  Of course, there are multiple theories for this phenomenon.  But the most likely scenario is that investors are simply opting for physical delivery of their investment.  And if one of the largest gold depositories in the world can’t fulfill investor demand… well… things could get interesting.

Are physical shortage fears fueling today’s gold rally?

It’s tough to say.  But the fact is, if registered COMEX inventories aren’t replenished soon, we could see a monumental rally in the price of gold.  The paper gold market will be forced to rise and anyone short the market will be in for a world of hurt.

By the way…

Managed money short positions in the gold market are still at extreme levels.  Hedge funds and other large speculators are convinced gold’s glory days are over and they’re shorting this market in search of profits.

But record low COMEX inventories has them playing with fire…

I’ll be keeping close tabs on this situation in coming issues of Commodity Trading Research.  If my hunch is correct, investors are in for one heck of a ride as gold short-sellers are forced to cover in the latter half of 2013! 

Until Next Time,

Justin Bennett

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Category: Gold, Precious Metals

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.