The Commodity Exchange Inc. (COMEX) is a commodity exchange based out of New York City where buyers and sellers trade precious metals. The Chicago Mercantile Exchange owns COMEX and is the world's largest options and futures metals exchange. Currently, COMEX operates a clearinghouse for gold, silver, platinum, palladium, aluminum, steel, and copper futures.
Why is COMEX Important in the Precious Metals Market?
The COMEX offers paper futures and options products for gold, silver, platinum, palladium, and copper in 100-ounce contracts. COMEX is the most reliable and liquid marketplace for trading precious metals. Commodity producers hedge their production through COMEX. The main players acting with a commercial interest in the exchange are industrial and financial consumers.
COMEX stores metals in several vaults in the greater NYC area. The exchange designates all bullion stored within these vaults in two categories: registered gold and eligible gold. COMEX labels gold that is acceptable for delivery under a futures contract as eligible. As a consequence, a warrant is deemed registered once a warrant has been issued for a certain amount of gold. The only difference between registered and eligible is whether a warrant is issued or not.
What is a Warrant?
A warrant is a financial document that notates the quantity of gold that meets COMEX requirements for a futures contract. The warrant works like a check, the amount of gold warrant corresponds to the registered amount purchased within the vault.
Can Registered Gold be Available for Delivery?
For instance, when somebody buys a gold futures contract, they are technically purchasing the right to take delivery of the gold bullion at a later date. However, in reality, most retail investors and speculators who open short-term positions never actually intend on taking delivery of any gold. Consequently, COMEX can easily convert eligible gold to registered with an easy electronic keystroke. As a result, all gold in COMEX vaults is considered available for delivery, since all gold needs is a warrant bound to the gold for it to be deliverable.
The above discussion provides a basic overview of the Comex registered gold position. So, you can see how significant COMEX influences the SPOT price of metals. I hope you found this article helpful, and that it helps you better understand the factors driving the Comex gold market.