Re the still-widening spread between spot and front month futures as well as EFPs, here's what I wrote for TFMR members a few minutes ago.
Maybe next week I can summarize this in a public post.
This is starting to get more attention and all you have to do is search X to find all sorts of analysis and possible explanations. Pending tariffs, supply issues, delivery delays....all of these things are mentioned. For now, let's just concern ourselves on the two things that we KNOW are true.
1. That wide of spread should never happen this late in the month. Never ever. Why? Because right now...right this very instant...you can buy spot at $2711 and sell a Feb25 at $2746 and then deliver your spot purchase to cover your short as soon as January 30. That's an easypeasy $35 profit (logistics, interest, etc notwithstanding). Each contract is 100 ounces so that's $3500. Do it on $100 contracts and you've to $350,000. But it's not happening...at least not in the size needed to close the spread.
2. The spread is going to close. It will. Just watch. Either the usual Spec washout and roll will dump the Feb25 price sometime in the next 5-6 days OR some sort of in between happens where futures fall and spot rallies as the arbs finally begin to take action. Either way, it's going to close. It will. It always does.
But then what? What does this all signify? This is the second consecutive month where this has happened. It shouldn't be happening but it is. My suspicion is that it's much deeper than just "current supply concerns" due to possible tariffs. The Banks have been playing the EFP game and profiting from the spread for years so none of this is new.
Eric told me to start watching EFP volume seven years ago...and I did. In fact, on a spreadsheet I have the EFP volume for EVERY DAY going back to November 24, 2017! Would you like to know what the total number of EFP trades is since that date?
It's 9,689,356.
So, if every EFP is for 100 ounces, that's 968,935,600 ounces for a theoretical 30,137 METRIC TONNES. That's an astonishing amount of "gold". Close to the sum total of ALL the gold held by the global central banks and here are The Banks passing it back and forth for a few bucks in spread arbitrage.
As such, do you think that EFPs signal real demand for real metal to deliver or are they just part of the paper game, which The Banks play for their profit and enjoyment?
Back to the current predicament...Why is this occurring now and for the second month in a row? For me, it's about trust and, right now, no Banker trusts the system enough to act and close the spread. If it continues, there will be delivery delays and the fraud of the pricing scheme will be exposed...and that's WHY it will close, one way or the other, most likely through a Spec flushing paper smash that forces the Feb25 end back down toward spot. That's what they were able to do last month and that's no doubt what they'll try to do next week, too.