The Death of The EFP

Understanding COMEX EFP and Its Historical Context

Longtime readers may recall that I've been using these weekly Sprott Money posts to highlight the use and abuse of the COMEX Exchange For Physical (EFP) system since late 2017 when Eric Sprott asked me to start monitoring the daily EFP volume. It's time for an unusual and unexpected update.

But first, where to start? Perhaps with some old links as background? Here are a few from the period of 2018-2020:

• COMEX Exchanges For Physical
• One Full Year of COMEX EFPs
• ​Bank EFP (Ab)Use Falls Sharply

 

What Is An EFP And How Has It Been Abused?

And again, what is an EFP? These "Exchanges For Physical" are often settled in London and shares in the big ETFs can be used as the vehicle to make it happen. Back in the day, what Eric had noticed was an incredible and nearly impossible volume of these EFP trades. After recording the daily volume for a full year, I was astounded by the numbers, too. This screenshot from the second link listed above:

The daily volume appeared unsustainable but it wasn't. In fact, abuse of the EFP system continued to grow through 2019 and into the first quarter of 2020. Here's an excerpt from a 2020 post:

As noted above, the peak all-time high in daily gold EFP volume was posted on March 12, 2020...just before the Covid lockdowns and the "logistical issues" the global gold market would soon experience. That March 12, 2020 total of 38,469 "Exchanges For Physical" implied a shift and settlement of 3,846,900 ounces of gold...or nearly 120 metric tonnes...that day alone.

 

Decline In EFP Volume Post-Covid

The abuse collapsed after Covid, however, but volume would still spike from time to time, particularly on days when price was volatile. For example:

1. 17,790 EFPs posted on July 19, 2024 with price down $57
2. 16,104 on August 5, 2024 with price down $25
3. 14,104 on December 11, 2024 with price up $38

 

Market Spreads And Delivery Delays

But then a funny thing happened. In the aftermath of the U.S. election, supposed concern over tariffs led to more "logistical problems" and wide spreads began to appear between the spot price of gold and front month COMEX contract. These spreads had typically been just $2-5 when the EFP abuse began in 2017 however, by late 2024, these spreads had widened to $30-50 and news reports began to circulate regarding multi-week delivery delays at the physical metal hub of London. This next link from early February of this year.

At the same time, daily EFP volume began to evaporate. There were still occasional surges that took daily volume up to 5,000 or 7,000, but most days brought EFP volume of less than 3,000. That's a far cry and a 90% drop-off from where it was 2019 and 2020!

And as the year has continued, EFP volume has plunged even further. Some lowlights:

1. 240 EFPs posted on June 30, 2025 with price up $20
2. 300 on June 6, 2025 with price down $28
3. 202 on May 27, 2025 with price down $65
4. 50 on April 28, 2025 with price up $49

 

Implications For Gold Pricing And Market Trust

And in case you think there's some seasonality to all of this:

1. April 2018 saw a total of 221,542 EFPs. April 2025 saw 64,914.
2. May 2019 saw a total of 147,192 EFPs. May 2025 saw 35,319.
3. June 2019 saw a total of 202,656 EFPs. June 2025 saw 31,240.
4. And here's your biggest drop-off...At the peak and before the Covid-driven collapse, the month of March 2020 saw a total of 362,049 EFPs. March of 2025 saw just 40,708.

So what does all of this mean? For me, it signals a collapse of confidence and trust in just-in-time delivery system that provides the underlying support of the fractional reserve and digital derivative pricing scheme. If you're a Bank trader and you have no reservations or concerns about the counterparties to your trade and the availability of the exchange's metal, then you play the EFP and make a seemingly riskless profit.

However, if you're that same Bank trader and you see the sudden blowout of the spot-futures spread, combined with the mainstream financial reporting of delivery delays....well, maybe you decide that the trade isn't so riskless, after all.

And for us stackers, the collapse in EFP volume is just another signal that the current pricing scheme is under duress. If you're exposed in any way to the counterparty risk inherent to the current system, you might want to consider other options. The European Central Bank issued such a warning just last month.

In the end, you might heed the old adage of "forewarned is forearmed" as the collapse of COMEX EFP volume is issuing a warning to all of us.

 

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