With 252 owners of delivery contracts for each ounce of delivery gold, there is strong probability that more than 0.4% will ask for their gold instead of accept a cash settlement. That would exhaust Comex's vaults of deliverable gold.
Comex will not, however, default on those asking for their promised gold. Instead Comex will offer the owners of eligible gold at Comex higher than current market POG to get the amount of gold needed to met the delivery requests. IE the value of the "delivered gold"* will very significantly exceed the standard cash settlement price. - A strong incentive for many more than just 0.4% of the owners of maturing delivery contract to ask for their promised gold.
I would guess at least 15% ask for their gold**, as immediate and certain capital gain it highly probable. No one knows how big an increase in POG would be required to get owners of eligible gold to agree their gold can transfer to the registered class. As can be seen in graph below there is plenty of eligible gold to met all the delivery requirements - It is just a question of what POG needed to get current owners of eligible gold to give up their gold for cash.
I'll try to compute what percent of owners of registered gold contracts asking for gold instead of cash would Break Comex - IE not even all the eligible gold at Comex transfer (at very high POG) would met the delivery demand.
* I put "delivered gold" in quotes as only a very small part if any would actually be delivered - need an armed escort truck to take it away. Almost 100% of it would just move from the registered to eligible stack. I.e. names of the owners of some eligible gold would change. The gold would not need to move an inch.
I think this has already been happening, since end of 2005. IE the graph's "blue line" is declining as the gold line goes up. The text quoted below was with the graph I copied from post 11 at
https://gold-forum.kitco.com/showth...s-Drop-To-Lowest-Levels-In-Over-7-Years/page2:
"Once again the culprit for the decline was JPM which saw not only a 122,124 ounces of Eligible gold be withdrawn, reducing the total by 13% to 750K ounces, but 8.9K ounces of registered gold was pushed into the Eligible category, in the process reducing total JPM registered gold by 45%..."
That essentially confirms my speculation deliverable is going down because eligible is going up, except in early 2013 both registered and eligible sharply fell together. JPM actually took its big block of gold from Comex. Perhaps JPM ceased to trust Comex? Operated on the POV: "If you don't hold, it you don't own it." Or just had delivery obligations of their own and needed the physical?
** As you can see in my next post, 15% asking for delivery of their promised gold is a volume of gold more than double
ALL the gold at Comex! (total of eligible + registered)