Monday, October 27, 2008

Got Gold Report – How to Buy Physical Gold and Silver on the COMEX

By Gene Arensberg

24 Oct 2008 at 07:25 PM GMT-04:00

Think the futures price of metals is too low? The Got Gold Report reports on how to buy and actually take delivery of gold and silver metal from the futures markets that have savaged the price of them so much. If the COMEX is determined to under price its physical metal, then they ought not to mind seeing it leave their warehouse for the popular physical market.


ATLANTA (ResourceInvestor.com) -- It is perhaps the ultimate irony in this great crash market of 2008.  Exactly when precious metals ought to be soaring on safe haven demand; when they should be stronger than a acre of garlic as a place for people to store wealth away from the hurricane of uncertainty that has become of the forex market (and the bizarre fluctuations of its now hugely inflated fiat currencies); the two most popular precious metals are instead being sold off on the futures markets just like all the other overly-leveraged commodities.

The ongoing deleveraging and intense flight to cash has buyers terrified worldwide.  They are locked-up, deer-in-the-headlights fashion, which gives the hedgers and short sellers supernatural strength.  It may sound trite, but that will continue until ends.  When it ends, for gold and silver, there will very likely be a just-as-vicious rally that will:

  1. Seem to be as irrational as the sell-down was, if not more, and
  2. Very likely be a rally like the world has never seen. 

It is vital to understand that the selloff on the metals is on the futures markets, where the players deal in all kinds of interrelated paper contracts.  These paper contracts usually only rarely settle by actual physical metal delivery.  It really isn’t very much like the popular physical bullion markets where people actually take the metal home the same day they fork over the cash.  But the futures markets do actually have metal that can be bought and delivered.  At least they still do so far, but they very well may have a lot less of that metal after December has come and gone. 

An Unprecedented Shortage of Bullion  

An unprecedented shortage of physical metal currently exists in the popular gold and silver bullion markets.  Premiums, the amount paid and charged by bullion dealers over the current spot or cash price, are at the highest levels since at least 1980, and possibly the highest ever seen for popular gold and silver bullion coins and bars. 

That’s the bad news.  People want gold and silver badly.  They are willing to pay much more than the spot price, but they can’t find bullion to buy.   They can’t find it because there isn’t enough physical metal available at these drastic, artificially induced, fear and fund-liquidation-caused spot prices.

How utterly ridiculous.  The metal’s price is falling even when it is in a physical shortage condition.  Yes, that is counter to normal economic theory.  Normally when shortages occur the price should rise to the level that attracts more of it into the market.  Normally, when shortages occur the rising price encourages capital investment by companies that sniff it out and eventually produce more of it, answering the shortage.   

These are anything but normal times, however.  Perversely the extremely low prices are causing producers to shut down mines, lay off people and hunker down for better times to come. News services are crowded with reports of important mines going on care and maintenance or shuttering altogether. Think we have a shortage now for gold and silver?  Just wait a few months.  With all the mine closures being announced now, the shortage of physical gold and especially silver is likely about to become the stuff of legend.

How to Buy Gold and Silver Metal on the COMEX

There is, however, one source of physical metal that remains available for investors who can act swiftly and decisively.  That source is the very market that has been mispricing the metals way too low.  The COMEX, division of NYMEX in New York.

Long-term holders and investors in gold and silver, frustrated by the lack of available metal in the marketplace, could consider taking delivery of real gold and silver directly from the miscreant bullion banks on the COMEX that continue to show disrespect to the value of the precious metals. This report will show how to do just that for the December COMEX contract, which is the most active of the futures contracts on the COMEX.

The Slogan:  Delivery in December or “DID” 

Okay, fine, if the two or three big U.S. banks that have savaged the gold and silver markets on the COMEX with an avalanche of short sales since July have so little respect for gold and silver that they are willing to sell them down into oblivion - when there is a raging shortage of metal in the real bullion marketplace – then shouldn’t some of us take them up on it? 

In other words, if the COMEX doesn’t respect the real physical market for gold and silver, shouldn’t we remove the metal from them and send it into the physical market that does respect it?  This report says yes, certainly we should.  They are figuratively begging us to. 

Apparently that exodus of metal from the COMEX is already underway.  For example, just over the last five trading days 2,051,970 ounces of silver were withdrawn from COMEX warehouse stocks and delivered elsewhere. The total inventory of silver fell from 133,582,226 to 131,530,256 ounces for the period.  And, that’s during October, an “off month,” or relatively light-contract month.

There are persistent rumors in trading circles that an unusually large number of long contract holders intend to stand for delivery in December for both gold and silver.  There is good reason for that.  Bullion dealers desperately need metal to fill mushrooming customer orders.   

Assuming one wants over 100 ounces of gold or 5,000 ounces of silver, how does one buy gold or silver on the COMEX and take delivery of the metal?  I asked Tony Klancic of Chicago based futures broker Lind Waldock for a primer on the subject.  Just below is his response via email in its entirety.  For those who are interested, Tony’s contact information is included. 

Again, if the COMEX is determined to under price its physical metal, then they ought not to mind seeing it leave their warehouse for the popular physical market. 

That’s it for this report. 

Until next time, as always, MIND YOUR STOPS. 

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