The COMEX implemented a new gold category for 400 ounce bars Monday, April 13th.

Normally, the gold is exchanged in either 100 ounce bars or 1 kilogram bars. This new category could imply that the COMEX has run out of 100 ounce bars.

Bullion Star tweeted on Sunday,

“COMEX secures secrecy agreement with CFTC under FOIA not to release details to the public of its market maker program for the new 400 oz gold futures contract hatched with LBMA, because ‘Disclosure Would Likely Cause Competitive Harm to COMEX’. Program begins tomorrow April 13.”[1]

The competitive advantage allegedly lost would only be a result of the contracts not being backed 1:1 with gold.

Craig Hemke writes on Sprott Money’s website that he believes the COMEX is running out of gold:

• “For today's discussion, let's begin with a brief, simplified summary of how we got here over the past few weeks: •  The Banks swap 290,000 COMEX contracts (over 900 metric tonnes) into EFPs in just the first fifteen trading days of March.

• The Fed announces QE∞ on Monday, March 23. COMEX gold price soars over $100.

• A party or parties seek actual, immediate delivery of COMEX 100-oz bars through EFP.

• COMEX must admit that it has no 100-oz bars to deliver on Tuesday, March 24.

• CME and LBMA make a joint announcement on Wednesday, March 25 that a new settlement contract will be introduced for Apr20 delivery. This contract will feature ‘delivery’ of fractional ownership of 400-oz London bars.”[2]

Is the COMEX backed 1:1 with physical gold?

End Note:

Bullion Star posted 3 links with their tweet. They are letters from the Chicago Mercantile Exchange (owner of the COMEX) Managing Director and Chief Regulatory Counsel, Christopher Bowen to Christopher J. Kirkpatrick, Office of the Secretariat, Commodity Futures Trading Commission.

The first link, entitled, Implementation of the Gold (Enhanced Delivery) Futures Market Maker Program COMEX Submission No. 20-174, states,

Dear Mr. Kirkpatrick:

“Commodity Exchange, Inc. (‘COMEX’ or ‘Exchange’) hereby notifies the Commodity Futures Trading Commission (‘CFTC’ or ‘Commission’) of plans to implement the Gold (Enhanced Delivery) Futures Market Maker Program (‘Program’). The proposed Program will become effective on April 13, 2020.”[3]

The second letter entitled, SUPPLEMENTAL SUBMISSION: COMEX Submission No. 20-174S: Additional Supplemental Information Relating to the Gold (Enhanced Delivery) Futures Market Maker Program. Subject to a Freedom of Information Act Protection. Confidential Treatment Requested by COMEX, states,

Dear Mr. Kirkpatrick:

Previously, pursuant to Submission No. 20-174 dated March 27, 2020, Commodity Exchange, Inc. (‘COMEX’ or ‘Exchange’) notified the Commodity Futures Trading Commission (‘CFTC’ or ‘Commission’) of plans to implement the Gold (Enhanced Delivery) Futures Market Maker Program (‘Program’). In this letter, the Exchange is providing the Commission with certain additional information related to the Program. The additional supplemental information is provided in Appendix A, for which a request for confidential treatment is being simultaneously submitted to the Commission. A copy of that request for confidential treatment is included with this supplemental filing.[4]

The copy of that request, FOIA Confidential Treatment Request, FOIA Confidential Treatment Request: Appendix A to COMEX Submission No. 20-174S, states,

“Notwithstanding this presumption of confidentiality, the confidential information in Appendix A still would be considered “confidential” because it is information that COMEX would not have disclosed to the public and its disclosure would cause substantial harm to the competitive position of COMEX.”[5]

[1]https://mobile.twitter.com/BullionStar/status/1249422416658522112

[2] https://www.sprottmoney.com/Blog/comex-search-seizure-craig-hemke-april-14-2020.html

[3]https://www.cmegroup.com/content/dam/cmegroup/market-regulation/rule-filings/2020/3/20-174.pdf

[4]https://www.cmegroup.com/content/dam/cmegroup/market-regulation/rule-filings/2020/3/20-174S.pdf

[5]https://www.cftc.gov/sites/default/files/filings/orgrules/20/03/rule032720comexdcm002.pdf