What a ride it has been for GCM0, the June-expiry Comex #gold contract.

One month ago it was trading at a $15/oz premium to the spot gold price.

Now it's trading at a $10/oz discount.

(short thread) https://t.co/X4Xy8kwOtO

I’ve had a few questions this morning about

“why is the Comex future trading at a discount to spot”

The short answer is that we are nearing first notice for Jun, so specs and investors are selling Jun and buying August.

This is pushing the Jun lower, hence the discount.

This screenshot of the contract table shows that much of the aggregate open interest has been rolled into August, but there is still nearly 100k lots left (as of 26 May). https://t.co/zwXmis12j6

As we've said previously, very few longs on Comex stand for delivery, so most of these contracts will probably need to be rolled, and with the first notice day approaching (29 May), the June contract will likely under pressure for the next few days. https://t.co/3FYYeSgNtG

Why is this contract maturity proving so difficult?

I think the problem comes from a lack of risk appetite from banks that are normally very active in arbitraging this market against the OTC price.

The blow out in the EFP in March has reduced risk appetite.

Here's a chart of the cost of rolling a Jun long into Aug. https://t.co/iMbXCyiF0x

I think this is another demonstration of just how badly the EFP blowout in March has affected the #gold market, especially the Comex futures market, although OTC liquidity has fallen too.

It also makes me wonder what all that gold that went to New York for? It looks like the longs are not standing for delivery after all.

(graph of Comex #gold stocks in millions of ounces). https://t.co/LbTrqwWusu

Gold remains a large, liquid market but, as this thread has shown, it's not functioning as well as it used to. This appears to be a particular problem for futures market speculators and investors and may partly explain heavy US-listed ETF buying over the past three months.

We will continue to monitor this situation and will tweet about it here and write about it on #Goldhub and its #blog.

https://t.co/PAIsceHxuu https://t.co/hKZM6KEnEm