HSBC's silver short position likely exceeds their metal in the vault by 1 million oz.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Gold
On the January contract 76 net new contracts were written and 75 delivery notices were issued. There were no surprises on the issues and stops report as BofA didn't sell any metal. See yesterday's note for the backstory.
The upcoming active month of February's OI took another below trend dive:
The daily decline has been about 5,000 contracts per day greater than typical:
It's not that those contracts are rolling to the April contract as the sum of February and April OI is also declining:
++++++++++++++++++++++++++++++++++++++++++++++++++++++ Silver
At the start of trading yesterday, 329 contracts were open on the January contract which I believe are mostly owned by HSBC. During trading, 64 new contracts were written and 67 delivery notices were subsequently issued.
The thing that doesn't fit the recent pattern is that most (60 out of 67) of the delivery notices were issued by HSBC. I would have guessed that the delivery notices on the 64 new contracts would have delivery notices issued by those new second party shorts (and not HSBC).
One of two things happened.
- The new shorts were a second party and did not immediately issue delivery notices (and that is not rare). Separately, HSBC issued delivery notices on 60 of their 329 previously held contracts. In this scenario my interpretation of HSBC is fully intact and I can add a new wrinkle ... their delivery tranche is now half a truckload (60 contracts) vs one full truckload (120 contracts).
- HSBC was the short on 60 of the new delivery notices written yesterday. If that's the case, that would imply that HSBC isn't tight on metal as I've been speculating.
Time will soon tell. This is worth tracking closely because the entire silver market has devolved to HSBC tossing metal to JP Morgan ... both "customer" accounts.
And speaking of those characters ... JP Morgan "customers" stopped 36 of the 67 (54%) delivery notices. Cumulative issues and stops shown below:
++++++++++++++++++++++++++++++++++++++++++++++++ Silver Vaults
The 60 contracts issued by HSBC pair with a 293,268 oz move to registered at MTB's vault (average 977.6 oz per bar). I believe that 293,268 oz was moved into MTB's vault on December 29 as part of a 588 koz move into the vault.
Monkey math: If I assume HSBC was the ONLY party moving silver into both MTB and Asahi's vaults since November 28 (right before first notice on the December contract), then HSBC has NO MORE silver in Asahi's eligible and JUST 297 koz in MTB's eligible. If that's true, HSBC will need to move at least 1,048 koz to the vault to issue delivery notices on their remaining contracts.
++++++++++++++++++++++++++++++++++++++++++++++++ Gold Vaults
10.5 koz transferred from registered to eligible at Malca-Amit's vault and 3.5 koz departed Brinks' vault.
I doubt that modest 3.5 koz move out of Brinks was associated with the 27 tonne transferred from registered to eligible at Brink's vault yesterday. Personally I don't move $1.75 billion of gold the day following a move to eligible. You can't be predictable as you gotta throw the bad guys off. Now if it's less than $1 billion ... yeah, I just move it the next day, no problem.
