has several warehouses for metals (as investors may take delivery), which contain lots of gold. The bullion held in these warehouses is divided into two categories: eligible and .
According to Comex, eligible gold means all metal that is acceptable for delivery against the applicable metal futures contract for which a warrant has not been issued. Conversely, registered metal means an eligible metal for which a warrant has been issued. As one can see, the only difference between registered and eligible gold is whether a warrant has been issued or not. What is a warrant? It is a document of title demonstrating that the referenced quantity of the covered metal meets the specifications of the applicable metal. We can say that a warrant is a warehouse receipt which works like a check – it is a bearer instrument which represents some amount of gold in registered stocks.
In simpler terms, eligible gold is gold brought into a Comex’s approved warehouse (generally, gold is held by Comex participants, not by the exchange itself) which meets Comex requirements (e.g. minimum fineness and weight) and, thus, is eligible for settlement of gold futures contracts traded on the exchange.
Importantly, eligible gold may or may not ever become registered (the owner may prefer to not use it to settle futures contracts on the exchange). Registration of gold means attaching a warrant and setting aside bullion to make delivery against gold futures contracts. All registered gold is deliverable, but not all deliverable gold is registered. In other words, generally all gold in Comex warehouses is available to be delivered; it just needs a warrant attached to it, which makes it registered. Actually, converting gold from eligible to registered takes only a couple of seconds, since eligible gold can be converted to registered by one press of a button. This is why all the claims that Comex is going to default, because the inventory of registered gold is decreasing, are nonsensical, since eligible gold can be easily converted to registered.
Typically, the total quantity of eligible and registered stocks in Comex warehouses tends to track gold prices higher and lower. When gold prices rise, this attracts more investors, therefore more metal will be held in warehouses on behalf of the investors. On the other hand, when gold prices fall, some owners of the metal will find better-rewarded uses outside Western investment stockpiles (e.g., in the Asian markets).
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