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: and registered gold.
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 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 the 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 the warrant is a warehouse receipt which works like a check – it is a bearer instrument which represents some amount of gold in the registered stocks.
In simpler terms, registered gold is gold that is fully available for delivery to investors with long positions who stand for bullion delivery, while eligible gold means gold that only meets the exchange’s requirements. Registered stocks are officially recognized by Comex for good delivery on the exchange and that inventory is set aside to make delivery against gold futures contracts. However, investors should not forget that eligible gold stocks may become registered stocks just with a simple electronic keystroke which attaches a warrant and thus registers the bullion. In other words, generally all gold in Comex warehouses is available for delivery; it just needs a warrant attached to it, which makes it registered. This is why all the claims that Comex is going to default, because the inventory of registered gold is decreasing, are nonsensical – eligible gold can easily be converted to registered.
Typically, the quantity of registered stocks in Comex warehouses tends to track gold prices higher and lower. The decline in gold prices indicates that gold is being better used off the market, instead of being held on the exchange – therefore, registered gold stocks are falling. Conversely, rising gold prices attract more investors who eagerly want to own and register some gold.
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