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Gold shortages continue as largest daily withdrawal in history leaves Comex

Gold for Sale
Gold for Sale
Photo by Feng Li/Getty Images

On Jan. 24, the U.S. Commodities Exchanges (Comex) issued its daily Vault Report and announced that yesterday saw the greatest one day withdrawal of physical gold bullion in history.

...moments ago the daily Comex gold vault report confirmed what many expected, namely that the JPM accumulation was merely in advance anticipation of major withdrawals. How major? Well, on January 23, JPM saw 321,500 ounces of gold depart in one day. This was tied for the single biggest daily withdrawal in history - Zerohedge

J.P. Morgan is the primary holder of physical gold and silver for the U.S. Comex, and up until recently, they stored metals eligible for contract and delivery at their headquarters across from the N.Y. Federal Reserve. However, in October of last year the financial center sold its underground vault and commercial property to a Chinese company, and has been divesting itself as the primary gold and silver depository for the futures market.

One thing that is disconcerting to many shorts in the gold market entering into 2014 are the massive increases in delivery demands of physical metals through the futures market, especially when their bets against gold were based on a system where very few investors actually took delivery, and instead rolled over their contracts to the following month. And as billionaire silver broker Eric Sprott said recently in an interview, the Comex is so depleted of gold in relation to their outstanding contracts that the market could see a default or fail to deliver event as soon as February.

Since the beginning of the year, the strongest performing asset in the markets has been gold, and the demand for the physical metal is only increasing, not subsiding. And should India follow through with yesterday's announcement that they were lessening restrictions on their citizens buying gold from the open market, then this new record high of physical gold withdrawals at the Comex could seem like a drop in the bucket as the lack of confidence in the dollar and in their own currencies will lead to a rush to safety that physical gold will always provide.