Thursday, March 3, 2011

So what's been happening on the COMEX?

As you will recall from this post on March 1, there were 4,250 contracts representing 21,250,000 oz of Silver which are standing for physical delivery this week in the delivery month of March.

Furthermore, early evidence from the COMEX seemed to indicate that the COMEX was severly stressed to provide physical Silver for these contracts.

According to analyst Harvey Organ, since then the Open Interest standing for delivery first fell from 4,250 contracts to 2,833 (1,417 contracts settled) but there were only deliveries on 250 contracts. This indicates the rest settled for cash.

(Which as you will recall was the whole objective in the rumour set out in Part 5: The Short Squeeze).

Organ reports that on the second day of settlement, the Open Interest fall from 2,833 contracts to 2,251. But there were only 42 delivery notices, meaning 540 contracts appear to have settled for cash.

(Remember each contract represents 5,000 ozs of Silver).

Yesterday Organ advises that "a miniscule 9 contracts (45000 oz) were served today. This is the third straight day that the deliveries have been tiny which indicate that the vaults are empty of silver metal. 2,242 contractsor 11,210,000 oz remain to be served upon. We have lost approximately 8.4 million oz to cash settlements these past two days."

And the rumour mill is cranking up about those cash settlements.

The same group that purported to lay out the plan for the short squeeze that we covered in Part 5 of our Silver series have surfaced on a couple of chatboards stating that they are amongst the group that have been paid out.

In announcing this development, there are some very interesting claims made. We have no way of validating this and as such it MUST be treated as rumour. However, here is a screenshot of what was posted (click on image to enlarge):

The group is claiming they were paid an 80% premium because the COMEX simply couldn't deliver on the contracts that are outstanding. An 80% premium means that they were paid at an equivilant of over $50 an ounce to go away.

There is no way to confirm if this is true. However, as Harvey Organ notes, for three days the number of deliveries of physical silver has been very small. This is highly unusual and indicates that the COMEX doesn't have the physical silver to deliver to those standing for physical.

In this enviroment, a premium of $50/oz in fiat cash is not unreasonable. And it is you clearest indication yet that silver at $34/oz is not only cheap, but highly undervalued.

More as this story plays out.



Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.


  1. Some excellent articles W! I will be re-reading them more carefully over the weekend now that I am back from holiday. ...V

  2. the real question is what's in it for that person to post details? If it's such a good deal why not keep it secret and make the money on an ongoing basis. Makes me think he's just a pumper.