Will COMEX Change The Rules Again To Surpress Gold Price?
Posted by Brian Ford on July 13, 2020
COMEX is the primary clearinghouse for the futures and options markets for gold, silver and copper. In 1975, shortly after Americans were allowed to own gold again, the COMEX began trading gold futures contracts with the specific intent of “managing” the price of gold.
And within just a year and a half, toward the end of 1976, the price of gold was slashed in half from almost $200 to $100. Yet, over the next few years, gold took off like a rocketship and reached a record high of over $800 in January 1980.
Over the years, COMEX has changed its rules intending to suppress gold prices. Below are some examples.
Since the inception of COMEX, the only type of gold inventory allowed to settle futures contracts were physical bars held in its bonded warehouses. These bars were classified as either “registered” or “eligible”. “Registered” bars were available to deliver against contracts whereas “eligible” bars were not. If the owner of “eligible” bars wanted to re-classify his bars to “registered”, he was able to do so. But late in 2019, the COMEX began allowing “pledged” bars to be considered gold in its warehouse, even though there was no physical metal whatsoever.
In March of this year, COMEX was short the 100 ounce bars needed to settle contracts so it simply changed the rules again. It introduced the “Gold Enhanced Delivery” contract for 400 ounces which could be settled in any combination of kilogram, 100 ounce or 400 ounce bars.
Historically, the only bars permitted by COMEX to settle gold contracts were those fabricated by firms certified as meeting COMEX quality standards. But, in another change to its rules, it recently began accepting gold bars from manufacturers who at any point had been approved by COMEX. This slick change of the rules immediately increased the amount of bars eligible for delivery.
With gold having recently reached an 8 year high, I wouldn’t be surprised if COMEX changed the rules yet again, to combat a rising gold bull market, just as it has done countless times in the past.