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Comparing Digital Metals - Craig Hemke (16/11/2017)

1 kilo silver bar close up image

November 16, 2017

With total Comex silver open interest near the 200,000 contract level, we thought it would be enlightening to once again discuss the total volume of physical mine supply versus digital metal supply on this futures exchange.

We've written on countless occasions about Comex alchemy and the fraud of digital metal. As a refresher, you might review both of these links before we continue:

https://www.sprottmoney.com/Blog/42-years-of-fract...

https://www.tfmetalsreport.com/blog/8252/econ-101-...

Today, we just thought we should remind you of the scale and scope of the fraud, particularly as it relates to silver. Again, under this current fractional reserve and derivative pricing scheme, price is "discovered" through the trading of derivative contracts, the supply of which is controlled by The Bullion Banks. These same banks are then responsible for managing and delivering physical metal at the digitally-derived price.

Currently, the total open interest (supply of contracts) in Comex silver is 199,899. For the sake of simplicity, let's round up and call it 200,000. At 5,000 ounces per contract, this represents 1,000,000,000 ounces of digital silver. That's a lot...especially when you consider that Keith Neumeyer told us last week that the world is on pace to mine about 800,000,000 ounces in 2017.

If we divide 1,000,000,000 digital ounces by 800,000,000 ounces of annual production, we find that total Comex silver open interest represents 125% of global mine supply. Is this a lot? Is this extreme? Is this evidence of a gross distortion of the price discovery process? Perhaps we should consider some of the other "metals" traded on Comex for perspective.

Let's start with Comex gold. How does Comex open interest compare? Well, the world is projected to mine about 2,800 metric tonnes this year or about 90,000,000 ounces of gold. With each Comex contract representing 100 ounces, the current total OI of 533,054 contracts equals 53,305,400 ounces or about 59% of total mine supply.

And what about platinum? A Comex contract represents 50 ounces of platinum and there are currently 78,974 of them floating around. This represents 3,948,700 ounces of digital platinum. And how much platinum does the world mine every year? About 180 metric tonnes or roughly 5.8 million ounces. So here the Comex open interest equates to about 69% of mine supply.

Lastly, and just for fun, you might consider that total Comex copper open interest is 283,153 contracts. Each contract represents 25,000 pounds of copper. This yields a total of just over 7 billion pounds of copper. That may sound like a lot until you consider that the world produces about 40 billion pounds annually. So, the Comex copper open interest represents only 18% of total mine supply.

Do you see a little bit of disparity here??? What would be the paper price of silver if open interest was cut in half to the level of gold and platinum? What would be the paper price if OI was reduced by 85% to the relative level of copper? And you wonder why we call the Bankers "criminals" and "thieves", and why we call the Comex a "den of vipers" while using the terms "fraud" "scam" and "sham".

One day this will all collapse as true physical demand simply overwhelms The Bankers and their fraudulent paper derivative pricing scheme. Recognizing this certainty, your best strategy continues to be the gradual accumulation of real, physical metal. When the demise of The Bullion Bankers finally comes, the price of silver derived exclusively through the trading of actual metal will certainly not be $17 per ounce.

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Head shot of Craig Hemke

About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

Comments

DAVID A ANDERSON
November 16, 2017 at 5:05 PM
I can tell by your photo that you are about half my age, Craig. I purchased a half bag of junk silver in 1980. I paid $17 an ounce. I still have that silver. The price may have fluctuated over the last 37 years but that is still the price today. I too hope that the banksters' skullduggery will one day collapse upon them, but I may not live to see it. And even if I do, just think of how much money they have made from their schemes. Then remember how much I haven't. Keep up the good fight.
joey
November 17, 2017 at 1:05 AM
Same old.. same old! TF pushing metals once more!