Eric Yeung šŸ‘šŸš€šŸŒ• Profile picture
Geopolitical and economic effects on Precious Metals and commodities. Not financial advice. Opinions are my own.
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Mar 15, 2025 • 4 tweets • 5 min read
Read this if you want to learn what’s going on with the EFPs that tie the COMEX-LBMA-ETFs together for the Western #Gold & #Silver trade. This here is a detailed explanation of EFP physical metal delivery settlements.

Below is a real-life example of how a COMEX Gold Exchange for Physical (EFP) transaction might be settled, step by step. This example is based on the mechanics of COMEX gold futures and the EFP process as facilitated by the CME Group, which oversees COMEX. An EFP allows traders to swap a futures position for a physical position (or vice versa) off-exchange, with the transaction later reported to the exchange. For this example, let’s assume a scenario involving a bullion bank and a gold producer on March 15, 2025.

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### Example Scenario
A bullion bank holds a short position of 100 COMEX gold futures contracts (equivalent to 10,000 troy ounces of gold) expiring in April 2025. The bank does not intend to deliver gold against these contracts via the standard COMEX delivery process (i.e., using registered gold in COMEX-approved depositories). Instead, it opts to close its position through an EFP by negotiating with a gold producer who has 10,000 ounces of physical gold available. The goal is to settle the futures position off-exchange and take delivery of physical gold.

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### Step-by-Step Settlement Process

#### Step 1: Negotiation Between Parties
- **Date:** March 15, 2025
- The bullion bank contacts the gold producer to negotiate the EFP. They agree to exchange the bank’s 100 short COMEX gold futures contracts (10,000 ounces) for 10,000 ounces of physical gold held by the producer.
- They settle on a price differential (the EFP price), which reflects the difference between the COMEX futures price and the spot price of physical gold, adjusted for factors like location, transportation costs, and timing. For simplicity, let’s assume the COMEX April 2025 gold futures price is $2,500 per ounce, and they agree on an EFP differential of -$5 per ounce, making the effective price for the physical gold $2,495 per ounce.

#### Step 2: Agreement on Physical Gold Specifications
- The physical gold must meet COMEX standards for delivery eligibility (e.g., 99.5% purity, in the form of 100-ounce bars or 1-kilogram bars from an approved refiner). However, in an EFP, the gold does not need to be in a COMEX-approved depository—it can be anywhere, as long as both parties agree.
- In this case, the producer has 100 bars of 100-ounce gold (10,000 ounces total) stored in a private vault in London. The bank accepts this gold as the ā€œrelated positionā€ in the EFP, even though it’s not in a COMEX depository.Image #### Step 3: Execution of the EFP Transaction
- The bullion bank and gold producer execute the EFP off-exchange (i.e., in the over-the-counter or OTC market). The terms are:
- The bank closes its 100 short futures contracts (selling its obligation to deliver 10,000 ounces on COMEX).
- The producer simultaneously delivers 10,000 ounces of physical gold to the bank’s designated account or vault.
- This is a bilateral agreement, and no open competitive trading occurs on the COMEX exchange itself.

#### Step 4: Reporting to COMEX
- Within the same trading day (by the close of business on March 15, 2025), the parties report the EFP to the CME Clearing House via their respective clearing members (firms that handle COMEX transactions).
- The report includes:
- The number of contracts (100 contracts = 10,000 ounces).
- The agreed-upon futures price ($2,500/oz) and the EFP differential (-$5/oz).
- Confirmation that the physical leg (10,000 ounces of gold) has been exchanged.
- The CME Clearing House records the EFP, which reduces the open interest in the April 2025 gold futures contract by 100 contracts, as the bank’s short position is now closed.

#### Step 5: Physical Delivery and Payment
- The gold producer arranges for the transfer of the 10,000 ounces of gold from its London vault to the bullion bank’s designated vault (e.g., a bank vault in London or New York, depending on the bank’s preference).
- The bank pays the producer $24,950,000 (10,000 ounces Ɨ $2,495/oz) via wire transfer, adjusted for any additional fees (e.g., shipping or insurance, if applicable).
- Delivery occurs outside the COMEX system, typically within a few business days (e.g., by March 18, 2025), depending on logistics.

#### Step 6: Finalization and Confirmation
- The CME Clearing House confirms the EFP transaction, ensuring all paperwork aligns with COMEX rules (e.g., Chapter 7 of the COMEX Rulebook, which governs EFPs).
- The bank now owns 10,000 ounces of physical gold, and its futures position is extinguished. The producer, meanwhile, has effectively ā€œboughtā€ the futures position (taking a long position momentarily before it’s closed out in the EFP) and received cash for its physical gold.

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### Outcome
- **Bullion Bank:** Closes its 100 short futures contracts without needing to source COMEX-registered gold, acquires 10,000 ounces of physical gold in London, and avoids the standard COMEX delivery process (e.g., warrants and depository logistics).
- **Gold Producer:** Offloads 10,000 ounces of physical gold at an agreed price ($2,495/oz), converts its physical holding into cash, and avoids entering the futures market directly.
- **COMEX Market:** Open interest decreases by 100 contracts, reflecting the settlement of the futures position off-exchange.

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### Key Notes
- **Flexibility:** The EFP allows the physical gold to be located anywhere (e.g., London), not just in COMEX-approved depositories, as long as it meets quality standards and both parties agree.
- **Pricing:** The -$5/oz differential might reflect the cost of moving gold from London to a COMEX depository (if needed) or market conditions favoring physical gold over futures.
- **Volume:** EFPs are common on COMEX, with thousands of contracts settled this way annually, often dwarfing standard physical deliveries.

This example illustrates how EFPs provide a flexible, efficient mechanism for settling COMEX gold futures positions while linking the futures and physical markets.
Mar 10, 2025 • 14 tweets • 8 min read
Basically Basel 3 has two sets of requirements that affect Banks holding #Gold in all its forms: allocated, unallocated, and derivative.

1) Capital requirements that depends on the #Gold’s risk weighting. The risk weighting depends on the form of the #Gold held as well as the liability against the #Gold (bank customer or bank house #Gold).

2) Required Stable Funding that depends on the form of the #Gold held by Banks. LBMA clearing firms (Bullion Banks) received an exemption (0% RSF) for when they clear unallocated clients’ #Gold. Unencumbered (not leased out) Allocated #Gold is always 0% RSF.

Yes this is more complicated than how the COMEX works. The above are ALL describing the potential ADDITIONAL COSTS for Banks to hold #Gold.

It is designed to reduce the risks that Banks take on when they hold different forms of #Gold under different conditions (house or customer).

It is not designed to ā€œencourageā€ Banks to hold #Gold for their own ā€œhouseā€ books.

It would however ā€œencourageā€ Banks to hold customers’ #Gold in unencumbered allocated form because that’s ZERO RISK WEIGHTING, Tier-1 capital, 0% RSF on the Banks’ balance sheet!Image Thanks @Kim64450675 for helping me out with this one.
Oct 20, 2023 • 4 tweets • 2 min read
BJ Milkshake finally admitted that the drawdown to the China Holding of USTs is due to ā€œNet Salesā€ and not ā€œmark-to-market lossesā€. This would apply to Saudi Arabia as well because of the new TIC reports methodology.

Of course I knew this months ago and have been saying that both the China & Saudi UST Holdings charts are Nominal/Face Value instead of Mark-to-Market because I am a private banking customer who has access to major HK banks’ Bond Desk research teams.

But Milkshake simps were compelled to waste my time by telling me that I was wrong and BJ Milkshake was right.

I hope you are happy now, Milkshake simps.

Thank you @Nostre_damus for notifying me. šŸ™
Image @Sorenthek @TFL1728 @LukeGromen @thesiriusreport šŸ”„šŸ‘†
Aug 3, 2022 • 7 tweets • 2 min read
China’s Nostradamus from 1500 years ago Tang Dynasty China (618 AD) predicted Nancy Pelosi going to Taiwan?

ā€œA woman in white visiting from the West will bring Chaos and Destruction amongst nations of the world. She is the beginning & origin of chaos.ā€ - Tui bei tu Chapter 42. The Bow represents War, the Guitar represents a false gift and the rabbit represents a Patsy (Sacrificial person/nation taking the fall).
Jul 22, 2022 • 21 tweets • 4 min read
Recently, news often reported that the exchange rate of the Hong Kong dollar has hit the weak-side convertibility guarantee, the HKMA will take Hong Kong dollar sell orders, and the aggregate balance of the banking system has decreased. What is the aggregate balance of the banking system? What is the weak party redemption guarantee? Will the aggregate balance of the banking system fall to zero, and will the Hong Kong economy explode?
May 28, 2022 • 6 tweets • 2 min read
Oil Consumption Chart šŸ”„šŸ‘‡. Even during the 1970s stagflation/recession Oil consumption grew! Yet experts* today tell you that the looming recession* will kill Oil demand and therefore Oil prices will come back down. If it makes you feel good*, believe in the lies. You deserve it Image Global Oil demand 2010 - 2021 Image
Apr 14, 2022 • 4 tweets • 1 min read
Elon read the ā€œArt of Warā€and Sun Tzu’s story of 三申五令 "three orders and five applications". Image
Apr 14, 2022 • 10 tweets • 4 min read
Thread 🧵

Some of my followers might know that I invested in #BTC miners in 2020-2021. I would like to share my story and use this as a reference as to what might happen to Gold & Silver miners going forward. I invested invested in #BTC miners early in 2020. At the peak, my paper profit in #BTC miners exceeded 4 million USD. Unfortunately, I rode them the way down to the middle of the mountain. I got out netting a couple hundred thousand USD on these #BTC miners investments.
Apr 14, 2022 • 4 tweets • 3 min read
On Tuesday, Jersey Police searched premises suspected to be connected to Mr. Abramovich's business activities on the island, Jersey Law Officers' Department said.

The billionaire is on the UK sanctions list over Russia's war in Ukraine.
Channel Island Jersey follows UK policy and imposes sanctions on the same people.

"The Royal Court also imposed a formal freezing order on 12 April, known as a saisie judiciaire, over assets understood to be valued in excess of US$7bn which are suspected to be connected to Mr Abramovich and which are either located in
Apr 14, 2022 • 4 tweets • 1 min read
I believe the war is about to heat up, for four reasons:

1) The siege of Mariupol is almost over; its end will free up a ton of Russian & Donbass troops for other major operations.

2) Strategic bombers of the Russian Aerospace Forces have reportedly been put on high alert. 3) The Russian Ministry of Foreign Affairs has announced that NATO vehicles transporting weapons for Ukraine are considered legitimate military targets.
Apr 13, 2022 • 4 tweets • 1 min read
šŸ‡·šŸ‡ŗšŸ‡ŗšŸ‡¦āš”A captive marine named Vitya tells how they tried to escape from the Ilyich plant.

He tells that the whole brigade tried to escape - more than 1500 people. Many had thoughts of giving up, but after two Marines tried to do so, they were caught by their own and disappeared .

Accordingly, if the statement that 1,000 people surrendered is true, then more than 500 soldiers were killed. I want to remind you that the command came to the Marines to break through, they were told by their leadership that help was coming towards them. Moreover,
Apr 12, 2022 • 5 tweets • 2 min read
Vikki ā€œThe Backā€ Dougan photographed by Ralph Crane, 1958. (Caption: This is the mother who wants the best for her son) 😯😯😯😯😯😯😯😯 Image Image
Apr 12, 2022 • 13 tweets • 3 min read
šŸ’¢A SECRET NATO BIOWEAPON LABORATORY IN THE UNDERGROUND OF MARIUPOL?
by Piero Messina

In the underground of Mariupol’s Azovstal there would be a secret NATO facility, managed together with Metabiota. A chemical and biological weapons laboratory whose existence must be hidden from the world. Here’s what the Russian special forces are looking for in the Mariupol dungeons. In the fighting in the last few hours, some Ukrainian command centers, groups and mercenary headquarters have been hit, also destroying many of the military equipment that has just
Apr 11, 2022 • 5 tweets • 1 min read
This is the Russian next-gen T-14 Armata. It has already been produced in significant numbers.

Have you seen them used in this conflict much, if at all?

Once you learn about this tank, you'll realize that Russia has been holding back. This story about Western countries going through old equipment in order to get 'upgraded' by new American equipment, is a load of ridiculousness.

Think about the MiG-35. Compare that to the Lockheed Martin F-35

Think about the S-500. Compare that to the PATRIOT system.
Apr 11, 2022 • 4 tweets • 1 min read
Lavrov: Russian special operation in Ukraine aims to put end to US course for world domination

Lavrov stated on Monday that the operation in Ukraine aims to put an end to America's plans for global domination. He also criticised EU top diplomat Josep Borrell for his latest statements, and noted that now the rules have changed drastically.
"This is an utterly serious change, even in the policy that the EU and the West under US leadership -
Apr 6, 2022 • 6 tweets • 1 min read
It occurs to me that the thing Jeff S. & Milkshake are most proud of ā€œTHE EURODOLLAR LIQUIDITY SUCTIONā€ pretty much lets the US treat the rest of the world as SLAVE COLONIES that are BENEATH them.Ā  It allows Americans to COSUME more than they produce.Ā 1/3 This thin vale of disguise allows Americans to sleep better at night and sit on their moral high horse while sucking on the TOIL and HARDWORK of Foreign countries.Ā 
Now that BRICS countries are diversifying out of the EURODOLLAR system, the biggest EURDOLLAR pumpers will be 2/3
Apr 6, 2022 • 4 tweets • 1 min read
The European Commission spoke about the fifth package of EU sanctions against Russia:

- Coal imports are banned. According to the European Commission, Russia will lose 4 billion euros a year.

- Ban on imports of other goods from Russia, such as cement, seafood, alcoholic beverages. Russia is to lose another 5.5 billion euros.

- A ban on exports of semiconductors, machinery and transport equipment - 10 billion euros.

- Russian companies are banned from participating in government procurement in the EU.
Apr 5, 2022 • 5 tweets • 2 min read
Exclusively for the RT military chronicle - analytics on the situation in Ukraine on 04/05/2022.

East.

The main events are concentrated there. The fire continues on the peaceful cities of Donbass. We struck targets in Chuguev, there is progress in the Izyum direction after a short respite. They knocked out Ukrainian nationalists from Popasna, fighting is going on on the outskirts. The LPR police are slowly, but moving forward. With the support of the Russian Armed Forces, the DPR army took Novobakhmutovka and entered the road leading to
Apr 5, 2022 • 4 tweets • 1 min read
Lavrov urged those in charge of Kyiv's actions to send a signal to the Ukrainian authorities not to sabotage negotiations with Moscow.

ā€œIf the Ukrainian delegation continues to declare that some additional steps are needed on the part of the Russian Federation, if it continues to categorically refuse (as it is doing now) even to discuss the tasks of denazification and demilitarization, restoration of the rights of the Russian language and if they continue to declare that they have no problems with the Russian language,
Apr 5, 2022 • 4 tweets • 1 min read
The Russian military delivered more than 10 tons of humanitarian aid to the residents of the Kharkov region.

Locals said that there were no notifications about the delivery of food packages and essentials - they learned about everything from neighbors and acquaintances. ā€œMy friend called me yesterday, so I didn’t know. Running - out of breath. Oh, thank you guys, thank you!ā€ - thanks the pensioner of the Russian military.

According to citizens, the stores only carry bread made by a small bakery and a couple of types of cereals.
Mar 2, 2022 • 4 tweets • 1 min read
Russian Finance Ministry Full Statement- Today, when buying a gold bar in a bank, a value-added tax (VAT) of goods in the amount of 20% is paid. The reverse operation - the sale of an ingot to a bank - does not imply a refund of the paid VAT, minfin.gov.ru/ru/press-cente… which makes transactions with gold unprofitable for citizens.
ā€œAgainst the backdrop of an unstable geopolitical situation, investing in gold will be an ideal alternative to buying dollars. The American currency is more volatile, subject to various kinds of risks.