31 October 2013

More Deception About the COMEX

The title of this post is a play on this TF Metals Report post. In it TF claims that deposits into JPM's stocks as shown on recent CME Gold Stocks report "are bullshit. Either completely fabricated and falsified OR simple paper claims. It's one or the other due to the simple statistical improbability of three consecutive round numbers totaling exactly 10 metric tonnes."

He then concludes that "this eligible gold deception currently being employed by The Comex is just another indicator" of "the end of the fractional reserve bullion banking system is rapidly approaching. Keep stacking and prepare accordingly."

I find it interesting that even though TF thinks that "this latest move is so brazen in its audacity" and says that "since no one else is talking about it, maybe I'm just crazy", he doesn't think to qualify his analysis. No TF, you are not crazy, you just didn't bother to do any research before jumping to a conclusion.

On the first page of the CME's gold futures rulebook it says:

"Gold meeting all of the following specifications shall be deliverable in satisfaction of futures contract delivery obligations under this rule:

1. Either one (1) 100 troy ounce bar, or three (3) one (1) kilo bars. ...

6. Upon receipt of the gold bar by the Licensed Depository who must also qualify and be designated a Licensed Weighmaster for gold, each gold bar shall be weighed in the lot measured to 1/100 of a troy ounce (two decimal points)."

Since gold kilo bars are cast to exactly one kilo, they all weigh the same - 32.15075oz. Under point number 6 that is then rounded down to 32.15oz. So 32.15 x 6000 kilos (ie 6 tonnes) gives the "statistically improbable" 192,900.000oz that TF observes.

I would note that in the wholesale markets kilo bars (as well as 400oz bars) are usually sold in 1 tonne lots, so it also makes sense that movements occur in the 1 tonne lots that TF considers a suspicious sign.

So TF's conclusion in his post is wrong because he didn't bother to check that COMEX allows kilos bars and that every kilo bar is recorded as 32.15oz, which multiplies out to the exact ounce figures.

I would also note that unlike kilo bars 400oz bars (and I believe 100oz silver COMEX ones) are odd weight, ie bars can be + or - of the target weight within approved tolerances - it is done this way because it is cheaper than casting bars to an exact weight. This is usually done by measuring out granules to the weight before then putting them into a mould and melting them. 400oz/100oz bars are casting by pouring from a crucible and relies on the skill of the pourer to fill the mould as close as possible to the target weight.

I was surprised that TF would not know the rules of his own futures exchange and one that he analyses and comments on, but it seems that he is not alone, with others republishing TF's post approvingly - GATA, Jesse, Harvey Organ & Bill Holter, Silver Doctors, Brother John F to name a few.

I can see why that may be, as kilo bars are primarily a size in demand in the India/Asian region rather than the US, and most of the bars in COMEX I guess would be 100oz. I note that the rulebook specifies a minimum of 99.5% purity whereas kilo bars for the Asian market are generally demanded to 99.99% purity. As it costs more to make 99.99 than 99.5, a bullion bank isn't going to put 99.99 kilo bars into COMEX and may not be able to use 99.5 COMEX bars to meet Asian demand without re-refining. So we sort of have two separate kilobar markets.

The end result of the above facts is that kilo bars in COMEX I guess would rare. Therefore, TF was on to something when he saw kilo bar movements into COMEX, the problem is he got the analysis completely backwards.

If Asian demand is high and a bullion bank can get good premiums on 99.99 kilobars, they are going to ask refiners to turn all mine dore into 99.99 kilo bars. So if we see 99.5 bars going into COMEX then it may be an indicator that Asian demand has eased. Maybe JPM had commitments with refiners to buy their output for a period of time, and if Asian demand had eased then they may have just asked their refineries to make 99.5 (for all we know maybe those deliveries were 99.99 kilo bars) and they are just parking them in their COMEX warehouse, waiting for Asian demand to return.

This Tuesday report from Reuters confirms the theory: Asia Gold-Chinese prices at a discount on credit crunch fears:

"'The rise in borrowing costs in onshore China plays a crucial role. People don't want to keep the metal and they try to dump it to raise cash,' said one precious metals trader in Hong Kong. Another trader said there had not been a significant drop in demand but liquidation of stocks was taking its toll on prices."

So if you were a trader, TF's advice to "keep stacking" on the basis of the unusual CME delivery figures was actually backwards - it was possibly a sell signal.

TF should keep an eye on the CME reports - if there are movements of round ounce tonne lots, indicative of kilo bars, out of the warehouses then it may be an advance bullish signal of Asian demand returning.

Unfortunately, I don't think TF is listening as six days ago I left comments to his post explaining the above kilo bar issue and he has not made any correction to his clearly incorrect post. Maybe he thinks I'm just an "ardent Cartel apologist and disinfo agent". A pity, as round ounce tonne lot movements looks like a good trading signal - if only you know how to read it.

Correction Nov 5th: After a discussion about this post with TF (see here, here and keep scrolling) I would like to clarify that I didn't intend to mean that TF's "keep stacking" was trading advice. My intent was to say IF you were a trader then you may have read his post as bullish. TF also noted that he was not following the comments on the original post, hence he missed by comments, so it was not a case of not listening.

I will also give props to TF for publishing my comments, which is more than I can say for some bloggers who remove comments that are critical of them.


  1. Qualify verb 1 To have the attributes required to do or have something. 2 To describe or be described as having a particular quality.

    You do realise Bron that you've described Faeces Ferguson's analysis as having little value due to a lack of quality?

  2. For amusement value, assuming these are 99.99% purity bars, what would it imply? Obviously such bars are higher cost. Did they have difficulty sourcing the more usual bars. Wouldn't that be unusual. ;)

  3. Hey Bron, I too was ignorant of Rule 6 allowing for kilobars at the Crimex until you mentioned it over at TFMetalsReport and am thankful to you for relieving me of my ignorance on the matter. Any comments yet on the Dubai Gold & Commodities Exchange “launching” a spot gold contract next year? Thanks. Regards, Spartacus Rex

  4. Well yes, they could be kilo bars. But how often are they kilo bars? Kilo bars are used in the East, not here. But hey, I'm sure you've done your research on that as well. Why did they have to go to Asia to get kilo bars? Oh never mind, it's probably irrelevant.

  5. Justin, I was using "qualify" in the sense of how auditors qualify accounts.

  6. Spartacus Rex,

    I don't think much will come of the Dubai spot contract. Nick Laird of Sharelynx.com noted in an email to me that "Dubai futures for gold & silver volumes so far have been anemic - when gold is in bull mode you get some interest & then it just falls off. Dubai is obviously a major gold conduit but so far it's futures markets has been tame."

  7. Thanks Bron, for your explanation TF's silence is what we expect from those who cannot admit errors.

    As for "every kilo bar is recorded as 32.15oz" does that mean each bar is not weighed separately? I would expect the weight and purity, plus it's refinery ID number to be stamped on each. So actual shipments weights would be entered on bills of lading [or what-ever document is sent with loads.

  8. Louis Nardozi,

    It is not a "could", deposits into COMEX can only be 100oz bars or kilo, and the figures that TF found can only be produced by a deposit of kilo bars.

    As I said in my post, kilo bars are not popular in the US so they would not appear in COMEX often, that is what makes it an interesting signal, so I don't get what you point is with the "often" comment.

    As to why they had to go to Asia to get the kilo bars - you are confusing where the kilo bars are going with where they come from. Most of kilo bars would come from the Swiss refineries (and Perth Mint) - no much kilo bars are made in Asia.

    Have you not seen the reports of the exports from the UK to Swiss then to HK?

    What we may be seeing is ETFs still losing metal, BBs moving that metal to Swiss for turning into kilo bars and with a temporary drop in Asian demand, they ship some to COMEX to park.

  9. Yes Bron, accountants qualify accounts by whether they have a particular quality or qualities that meet a certain standard.

    That's what the word means & is why you used it. I'm sure you do realise it, you just can't admit it.

  10. Motley Fool,

    They could be 99.99 purity, as if Asian demand returns then they can just ship them out of COMEX warehouse to Asia.

    Whether they are 99.99 or 99.5 doesn't indicate any sourcing problems, the BB just tells the refinery what sort of product it wants.

  11. I used it in this sense, not in terms of quality


    "If you qualify your statement, you add some information, evidence, or phrase in order to make it less strong or less generalized" ie the opposite of a categorical statement.

  12. Jim Stewart,

    Each kilobar has its weight, purity, stamp and bar number on it and check weighed before it is let out the door. Whether a vault would weigh each of them on receipt depends on the vault - more likely they would bulk weigh them.

  13. Bron, Re: "I don't think much will come of the Dubai spot contract" Ah crap, ie I got to keep digging? Come on, Bron, how about just a tiny little hint where to look for those "two deals"? Please? Regards, Spartacus Rex

  14. Aw, Come Bron! How about which hemisphere at least?

  15. Bron.
    if you are anticipating that your freshly refined gold stored at a Comex warehouse will go to China anyway, wouldn't it be a wise move for choosing 999,9 1 kg bars instead of 995 100 oz bars?

    + 999,9 1 kg are scoring higher prices in China
    + No remelting costs and refining losses for doing that 995 to 999,9 magic.
    + Faster delivery since there is no additional refining lag.

    Let's wait and see, whether 999,9 1 kg bars are seen as new guests at Comex warehouses more often from now on.

    This could tell a nice story about the direction physical gold at the COMEX is going.

  16. Hi Bron,

    I see Harvey is reporting that GLD inventory hasn't changed since Oct. 25. Assuming that the drawdowns in GLD inventory over the last few months or so were being shipped to Asia, I would think this is supportive of your explanation above.

  17. Bron: You suggest that I'm "hiding" from you because you've continued to add posts to a column that is over a week old. Whatever. If you want to claim the intellectual high ground again, knock yourself out. You have your opinion and I have mine and until your beloved fractional reserve system becomes a significantly less opaque, that's all we have to go on.

  18. Hi Turd,

    I would think that with Bron having offered you this gem of analysis, on numbers that you first noticed, you would be a bit more humble and actually expand your mind-set, rather than once again rejecting any information that is not conspiracy based.

    Same as when Dan Norcini disagreed with your analysis. Rather the re-examine your work you turned on him at a personal level. Passion is fine, but not when it gets in the way of the facts.

    It's unfortunate.

  19. Suspicion based accusations and mathematical formulations that rely on probale MOPE'd data requires an almost blind faith to simply swallow as factual.

  20. Thanks, this is most informative.

    Regarding values: How is the fact that a 99.99% bar contains 0.49% more gold than a 99.5% bar accounted for by Comex? On $100 million the difference is almost $500 000. I assume nobody will deliver the more valuable bars unless an adjustment is made when the bars are delivered from the seller through Comex to the buyer.

  21. This comment has been removed by the author.

  22. but Turd - it's not a "difference of opinion," which is the fallback all of you charlatans like to use when you get called out on stuff you don't understand.

    Your post declared the COMEX numbers to be a statistical impossibility because you don't understand how it works. not because of an opinion - because of a factual misunderstanding.

    Just like when your buddy Harvey posts daily about COMEX vault deliveries that haven't settled yet - it's not a difference of opinion, he's just wrong.

    And when your boy Andy demonstrates that he doesn't understand how GLD operates... or when he talks about "allocating at the fix" or when he quotes "100-1 leverage" - these are not differences of opinion, they are demonstrations of ignorance.

    But I have a question: in your thread you mentioned a theory:

    "JPM is taking in freshly-minted Chinese bars in order to satisfy demand because they can't get gold from anywhere else"

    while at the same time you claim that JP Morgan has cornered COMEX gold from the long side... So, ummm - why would they need to take Chinese Kilobars (which go for a huge premium, right - according to all of your stellar sources????), and deliver them to the COMEX where they (JPM) are already massively long contracts. I mean, I hope I don't need to remind you that longs don't need to make deliveries...

    that's not a reality based theory, Turd... but I guess we just have a difference of opinion...

    congrats, Turd - you're a great salesman, and you've landed in the perfect industry for your skills. There will always be a ready band of minions willing to drink up the rhetoric you spew, and I can see that you've figured out how to profit from it. I mean it - congratulations.

  23. I don't understand. A 100 oz bar has more gold than three kilo bars. How is it possible that both can settle a contract?

  24. JPMorgan has not yet settled their May' and June's contracts which stand at 9.3 tons for May and 30.7 tons for June. How can anyone claim these numbers JPMorgan state are in their vaults are real in a ny way shape or form when they have yet to settle on those prior months contracts? Whatever games these banks are playing is with rules thatt simply dont exist. End of story Bron.

  25. @JoeRenaud:

    that is false.



    you are listening to people who have no idea what they are talking about.

  26. I must say, that I read so many diverse opinions on so many blogs, it is difficult to make a concise judgement on anything.

    What does spark my interest though, is Brons` seemingly unlimited time and effort to post on a variety of sites with his views. One wonders why as Perth Mint Senior Analyst, would he feel the need or even have the time to engage in such disscussions. "He who doth protest
    too much" perhaps!

  27. Just about every talking head online has a vested interest in being right while hoping everyone else is wrong so they look smart by comparison.
    They're all hoping to be the one to make the next big prediction in order to feather their bed or online resume' .

    Defensive smugness has become a trademark trait among some in the PM community and the persistent ridicule of others takes away from the message or the messenger.

    And the folks who think they've been above it all are kidding themselves if they think they haven't been a DB at times.

    People tune that out after awhile. Try being humble and stop trying to be right all the time. It seems almost desperate.

  28. Hi Bron,

    I came across this quote on a silver website.

    “The United States Mint will issue its last weekly allocation of 2013 dated American Eagle Silver Bullion coins on Monday, December 9, 2013. We will begin accepting orders for 2014 dated American Eagle Silver Bullion coins on Monday, January 13, 2014.”

    I was just wondering if there is any truth to this? Is this just normal operating procedure for this time of year as the US Mint switches to producing 2014 American Silver Eagles or is there a temporary shortage of silver blanks in the US at the moment? Does the Perth Mint sometimes supply silver blanks to the US?

    Thanks for your blog.

  29. Dear Bron,

    why are COMEX warehouses down 66% on their gold holdings YTD?

  30. Can someone pls tell me who has a worse track record than Turd at predicting prices? How can it be a coincidence?

  31. Well, kilo bars mar be counted as 32.15 Oz or 1000g, but IF YOU ACTUALLY WEIGH A KILOBAR it usually comes out 1-3g above 1000g, in my experience.

  32. Congrat's on getting this article posted at 24hgold.

    I can't be the only one tiring of the fearmongering histrionics and accusations of manipulation over and over. All major markets are manipulated to some degree and they always have been.

    I want the same folks who moan about it when the PM's are down to wail about the injustice of it all when they eventually swing wildly the other way when the big money manipulates it higher.

  33. My response to TF can be found here http://www.tfmetalsreport.com/comment/362710#comment-362710 click on the link and give TF the hits he wants :)

  34. Baruch,

    I am not sure about that. If COMEX only works on the gross weight then yes anyone delivering 9999 bars will get shortchanged and therefore it would not happen. If purity is taken into account then it won't matter. This is detailed operational stuff I am not aware of.


    I understand that there is a cash adjustment made for any difference in ounces. Even 100oz are not exactly 100oz, so the receiver either pays or receives cash for the excess (or shortfall) in actual physical ounces received.

  35. kevdd1,

    I don't post on too many forums and sites, but in any case that is part of my job to do so, which is how I have the time

  36. "Is this just normal operating procedure for this time of year as the US Mint switches to producing 2014 American Silver Eagles"

    We supply blanks to the US Mint along with others. I am not aware of the US Mint's year end processes but would note that they have a big surge in Demand in January for the new year dated coins, so I think the stopping of 2013 is to give them time to build up stocks as well as Christmas holidays.

    "why are COMEX warehouses down 66% on their gold holdings YTD?"

    Same reason ETF holdings are down, big money investors are getting out of the gold "trade" and on to the next trend. Retail investors are staying in.

    "Try being humble and stop trying to be right all the time."

    I only write about stuff I know, so maybe that make me seem like I'm trying to be right all the time. However if you have a look at the infrequency of my posting, when a lot of stuff is going on, then you might conclude I'm less certainly about things than you think.

  37. Say Bron, you're a pretty resourceful guy, how would someone get a copy of each of the serial #'s of those 6 Tons of kilogram bars which JPMorgue miraculously pulled out of its back pocket and supposedly "delivered"? Gee, wonder if the Comex has any pictures of them as well?

  38. Bron...regarding "humble"etc.

    I wasn't referencing you in that post. It was about the fearmongering talking heads being DB's.

  39. Wait a minute, something doesn't sound right. Aren't the kilobars weighed in oz, and each of their weights added up? Hence always 2-decimals accuracy?


    Are you saying the bars are weighed in kg's and then multiplied by 32.15??

    Doing it this way will obviously give a fractionless-number all the time!


  40. Comex rule read as each bar's weight is rounded to 2 decimals, then multiplied out.

  41. Yes, but the delivered kilobars will be weighed in what units? Kilos, grams, ounces?

    But even if they measure in kilos, getting exactly 6000kg, 6100kg, 7000kg etc is very hard. Deviation for each bar will be +/- 2g at least. For 1000 contracts, that's +/- 6 kg! not a trivial amount.

    So for your 6000kg example, actual weight should be around 5988-6012kg total. When multiplied by 32.15, only the perfect 6000kg will give no decimals. That is very hard to get 3x in a row!

  42. It seems like an exercise in futility to keep using different ficticious examples of weights on gold bars and then try to extrapolate those numbers to base a conclusion (or accusation) off of.

    I think the PM atmosphere has become so stale that some folks are kind of flailing about trying to keep it fresh and people interested in their message.

    In the end, the debate over a couple decimal points when multiple tonnes of gold is involved is meaningless.

    To the extent some folks have staked some of their credibility online they have also revealed their petulant attitude about the importance of facts.

    But I guess facts sometimes get in the way of a good yarn.

  43. Bron,

    Are you sort of bothered that more people follow him? Why suddenly the aggresive nature posting her and there?

    Just let him be. You each have your own views.

  44. "Yes, but the delivered kilobars will be weighed in what units?"

    Kilobars are traded in the pro markets based on their nominal weight, not actual weight, which is where I think you're getting confused. This should explain http://www.perthmint.com.au/education-weights.aspx

  45. "Are you sort of bothered that more people follow him? Why suddenly the aggresive nature posting her and there?"

    Suddenly aggressive? You need to go back and read my past posts, I've always nitpicked on factual issues from a range of bloggers.

    FYI, see the recent discussions I've had with TF, links appended to my original post along with a correction.

  46. http://www.tfmetalsreport.com/comment/363034#comment-363034

    It's a shame to watch bitter and envious douchebaggery be injected into almost every comment or outlook lately that doesn't match the authors.

    I guess mocking people or giving everyone a virtual middle finger is considered sound business principles to some. It's the recipe for a shriveling base of support or even worse...indifference.

    The traffic reflects it.

  47. That link is to the vault part of TF, so I have no idea what you are referring to.