Gold Analyst Warns of Leverage: “There Are About 325 Paper Ounces For Every Physical Ounce Backing It”
Back in September Zero Hedgereported that something snapped in the COMEX market and all indicators suggest there was a relentless outflow in registered gold. At that time there were about 202,054 ounces of gold available for delivery. To put that into perspective, Craig Hemke of TF Metals Report points out that just earlier this year there were nearly one million registered ounces available.
What this likely means is that someone, somewhere is requesting that their paper holdings be converted into deliverable physical gold. All the while many a mainstream pundit has declared that gold is nothing but a relic of times past. Yet, despite its purported unpopularity, since the last time the COMEX snapped in September even more registered gold has disappeared.
As of December, notes Hemke in his latest interview with Crush The Street, we’ve hit an all-time low in registered physical metal at the COMEX which has in turn led to a massive amount of leverage.
We’re at an all time low of about 120,000 [ounces of registered holdings].
But yet the total open interest- the amount of paper contracts based upon that declining amount of physical metal – has stayed the same.
Now, there’s about 325 paper ounces for every one physical ounce backing it. In the past that number was always around 10-to-1 or 20-to-1.
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It’s another one of these data points that we follow that seems to indicate a global physical tightness.
In the full interview Hemke explains what this means for the gold market, as well as why the leverage in COMEX precious metals is significantly different than stock markets:
…click on the above link to read the rest of the article…
