The Audacity of MOPE

With the metals down again today, I thought it was time to spread some information, not misinformation or disinformation.

The common MOPE regarding the rising U.S. stock market and potential Fed "tapering" is that finally, after four years of fits and starts, the U.S. economy is recovering and growing based on the improving economic statistics and burgeoning housing recovery. So is that really the case?

Yesterday, we discussed the fallacies of the latest BLSBS data and, as any regular reader of ZeroHedge knows, over the past 90 days almost every key metric of economic activity has "disappointed". Just today we had:

And, again, that's just today. The meme is that everything is finally getting better. Really? Really?? Hmmm. Let's go back to that housing starts thingy. As discussed yesterday, there's a certain LAW called The Law of Supply and Demand. For those who failed Econ 101, think of it in terms of a chart with a vertical axis and a horizontal axis. In it's most basic form, it looks like this:

What this is showing you is that price exists at the intersection of supply and demand. If you increase the supply or decrease the demand of an item, the price equilibrium is reset lower and price falls. Conversely, decreasing supply or increasing demand has the impact of raising prices. (See, it's not complicated. Maybe if you had spent more time studying and less time at the bar, you might have had a higher GPA!)

So, what does this mean for our supposedly robust housing recovery? While admitting that this is not the be-all-end-all, these four charts should be enough to give you pause and prompt you to consider whether the mainstream media is giving you the facts or just a heaping pile of MOPE.

If you're going to build a house, an apartment complex or an office building, you need to acquire a number of things. Most of the process is summarized quite neatly by Thornton Mellon in the clip below:

For the purposes of this discussion, however, let's keep it simple. For our house, we'll need lots of lumber for construction, copper for wiring and plumbing, aluminum for all the HVAC stuff and steel for the support columns and crossbeams. Again, price is a function of supply and demand so one might expect that a "robust" housing sector would be causing increased demand for these raw materials. One might expect that but one would be wrong.

Let's see, how's that lumber market doing?

And I think we all know that ole DrC hasn't been doing too well, either...

Uh-oh. Zero for two. Maybe aluminum and steel are faring better? Nope.

Ahh, but what do I know. I'm just a dope with a MacBook (that's for Turdle wink). But it sure looks to me that there isn't much of a housing recovery going on. And if there isn't a housing recovery, then the U.S. economy isn't getting any better. And if the U.S. economy isn't getting any better, then tax revenues won't be increasing. And if tax revenues won't be increasing, then the federal deficit won't be falling. And if the deficit isn't falling, then the Fed will have to keep propping up the bond market. And if the Fed has to continue propping up the bond market, the idea of them "tapering" is simple nonsense. And if tapering is nonsense, explain to me why the metals are once again falling this week.

Well, the past three days, it's all started in London. I think I recall that Ranting Andy has a term for this action but I can't remember what it is. What I do know is that when the selling starts at 2:00 am New York time and carries on until about 7:00 am New York time, the selling is originating in London. And who's in London? Just the bullion banks, that's all, doing their dirty deeds to slant the market in the thin, pre-Comex trading, trying to set the tone for the spec momo HFT money to come charging in at the 8:20 EDT Comex open. It's not complicated and it's all right here for everyone to see:

For today, at least, their efforts have been thwarted by all the crappy economic news and we've got a bit of a bounce on our hands. (That hat is still looking tasty, though.) Maybe, just maybe, we're getting a double bottom painted onto the charts? We'll see. Time will tell.

One last thing to discuss today. You know, back in the day, over two years ago when silver was soaring, there was a lot of talk about Comex defaults and commercial signal failures. I have to admit being sucked in a bit by this back then. Obviously, it didn't happen and I've since been very wary of this kind of talk. Again, if we've learned anything these past three years or so its that the primary power held by TPTB is the power to postpone the inevitable. That said, the Comex gold inventory numbers are really beginning to capture my attention on a daily basis.

We discussed this a bit yesterday but it's worth going over again today. After JPM reclassified another 160,000 ounces of gold from Registered (able to be used to for contract delivery) to Eligible (not ready for delivery), the TOTAL Comex registered inventory fell again yesterday and it now stands at just 1,676,000 troy ounces or about 52 metric tonnes.

Recall that every Comex gold contract is for 100 ounces. This means that the Comex registered vaults only have enough gold on hand to physically settle just 16,760 contracts. Big deal, you say. So what, you mutter. And you may be right. Most likely, The Shell Game & Charade will continue through the clever reclassification of more than enough rehypothecated gold from Eligible to Registered. OK, maybe. But chew on this for a minute.

The first "delivery" month for gold this year was February. That month, the total number of contracts standing for delivery totaled more than 13,000. This was somewhat odd in that that was nearly more than August, October and December of 2012 combined. That got my attention. Then, when April delivery rolled around, just 6,600 initially stood for delivery. Crisis passed, right? February was just a one-off. An outlier. Uhhh, nope. Over the course of the month, money continued to flow into the April contract for immediate delivery. These buyers were ponying up 100% margin and "jumping the queue" to some extent in that they were seemingly unwilling to wait for June. In the end, when it was all said and done, the Comex ended up delivering to 11,632 contracts in April.

And now here we come toward June. First Notice Day for the June contract is two weeks from tomorrow, the 31st. Again, on that day, the June13 stops trading and all contract holders must put up 100% margin in order to indicate their intent to take delivery. As of yesterday, the total open interest in the June contract was still 200,477. No doubt the vast majority of these are paper traders who, as we approach the end of this month, will sell or cover and roll into August. However, some will hold, intent upon taking delivery. (Maybe if you're Shanghai and you're currently completely cleaned out of gold in your vaults, you might take delivery of a few contracts? Hey, a guy can hope, can't he?) Of course, the question is, how many?

Again, as of this moment, The Comex only has enough Registered gold to settle 16,760 contracts. For some perspective, when we were 11 days out from FND for the April contract, the OI for April was 196,135. When we were 11 days out for the Feb13, the OI was 200,441. So, having the current June OI stand at 200,477 tells us very little. However, we must watch this very closely in the days ahead. Let's keep an eye on Comex vault changes and compare that to the daily drawdown of June open interest.

OK, that's all for today. Once again I plead with you to keep the faith and stand defiant. The laws of supply and demand are currently impacting paper metal which, in turn, impact the price of physical metal, too. This cannot and will not last forever. Hang in there.

TF

 

275 Comments

Gold Dog's picture

Test

Please work!

                                                     

This is beautiful! Posting pictures will help tons!

Dog

indosil's picture

What's Wrong with Crude??

What's Wrong with Crude??...momo chasing algos driving it higher or what....Base metals....Precious Metals..nice turnaround...what's going on??

indosil's picture

Nice FUBM

but why?????????????????????????????

¤'s picture

better & better

Not much, laying low and smelling the roses, enjoying some sunny pleasant weather and gaining a bronze tan cool

Life is good and no real worries here about anything. I hope it's been equally good for you and everyone else here.

Everyone have a great day/weekend yes

Turd Ferguson's picture

How's this for a head-and-shoulder

MODERATOR

yikes! Now, if this was a chart of The Pig instead of the euro, it would immediately reverse and charge to new highs...

argent rampant's picture

@DPH

Glad to hear life is treating you well! smiley

I thought if anyone could ferret out any news about this event it would be you. Seems strange to me that my google search returns nothing since a few days BEFORE the conference.

From Turd's missive 5/9:

Did you even know that this meeting was taking place this week? Have you seen coverage in the mainstream press? Did CNBS send LIESman or Headiromo over for live reports? Here's the summary and source link: http://www.4-traders.com/news/G-20-Group-of-Twenty-Finance-Ministers-and-Centr-Global-Finance-in-Transition-conference-to-take--16735638/

"On May 7-8, 2013, Istanbul (Turkey) will host the Global Finance in Transition conference. The event is organized by the Central Bank of the Republic of Turkey jointly with the Reinventing Bretton Woods Committee and the Russian Ministry of Finance.
Representatives of G20 finance ministries and central banks, international organizations, research institutions and businesses will take part in the conference. Head of Turkey's Central Bank Erdem Basci, Deputy Minister of Finance of Russia Sergey Storchak and Executive Director for the Reinventing Bretton Woods Committee Marc Uzan will give the opening remarks at the conference.
Five panel discussions are planned as part of the event. They will cover the international financial architecture, in particular, changes in the flow of global investments, local bond markets and growth in emerging economies, incentives and determinants of investment and other issues. In addition it is expected that new instruments and incentives for making the global financial system safer will be suggested during the forum."

Did you know there was such a thing as the "Reinventing Bretton Woods Committee"? Wouldn't you like to know how the panel discussions of "international financial architecture" or "flow of global investments" went? Also, it was "expected that new instruments and incentives for making the global financial system safer will be suggested". Oh, really? That sounds interesting. But of course, CNBS doesn't care. Their main story right now is "Forget Software. Hardware Is Where It's At!" http://www.cnbc.com/id/100716901 Nero fiddles while Rome burns...

Turd Ferguson's picture

Abenomics

MODERATOR

Almost parabolic. Not quite yet...

Turd Ferguson's picture

Yes

MODERATOR

That is rather odd, is it not?

Here's the only press release:

"In response to a question regarding the imminent replacement of the U.S. dollar as world reserve currency, the only answer given by Finance Minister Storchak was "Shhhhhh".

Response to: @DPH
Hondo's picture

Info for any bee keepers out there

Firefighters are constantly dispatched to " bee alarms" for public protection.  The trend is changing on how we deal with the problem of bees.  The preferred method would to have bee keepers show up and relocate the hive to thier facilities.  The problem is lack of bee keepers in many areas or them wanting $500 to mitigate the problem and keep the bees.  Tell any bee keeper amigos to contact thier local and regional fire departments and/ or 911 call centers and have thier contact info added to the ( evil " system" sarc.). Seriously, they will likely get several calls a year pending they show up and take the bees.  Our usual, and only option, is to kill them with foam( public life safety issues ).  This is slowly changing and is dependent on the bee keepers.

 
Stay safe,
Hondo
¤'s picture

movement

The Yen, USD & UST are spiking upwards for now and dragging oil/gold with them.

The multi-trillion dollar FX markets are the dice that control everything. I hope it comes as no surprise to anyone when the USD/DXY eventually smashes through 85 and beyond. 

One look at a 10 year DXY chart says it all and given the MOPE of the US economy and the MSM  QE withdrawal tea leaves tells me  were headed in that direction as unlikely or unwarranted as it seems.

Lots of unanticipated stuff on the horizon I think.

Gold Dog's picture

Another test.

New pic from back yard.

New pic from the back yard.

                                                      

Victory over the insidious powers of technology is mine!!!!!

Rui's picture

Volume surge on SLV Jun PUT @18 & @20

Both 18 strike and 20 strike have its OI tripled yesterday, which is not a good sign on silver going forward. I think it's likely to have a relief bounce to, say, 20DMA early next week then turn to fall below the April low. It might not even get this bounce. Just my 2% guess.

department of truth's picture

If you want to make money in today's markets

Just do the opposite of whatever makes sense.

Quantitative Easing to Infinity and Beyond?  Quick, sell precious metals and go long on the US dollar!!

Real unemployment rate 23% and real growth in the economy actually negative (despite propaganda figures from the Federal government)?  Quick, invest in the stock market!!

$230 trillion in interest-rate swaps to prop up the bond market, to keep interest rates at 0% despite everything going to hell in a handbasket?  Quick, buy more US Treasury bonds!!

Alice through the Looking Glass until the SHTF when the petrodollar becomes history.

Hammer's picture

I can't hold back from

I can't hold back from Turdville on this one any longer. Useful insight imho

http://aheadoftheherd.com/MorningReports/Gold-Silver-market-morning.html

unthought known's picture

HUGE Silver shortage for Eagles at Apmex

Only 100,000 available!!! yeah. supply is tight. Cant get silver anywhere. Sprotts premium is non existent. Silver is going down to 15 and maybe it will stop there. Long term it is still a great investment but I am sure the same was said in 1980 when it dropped from 50 dollars. Long term could be 100 years as the PTB are pretty damn powerful....

Nigel Black's picture

Another great article by SRSrocco

U.S. GOLD EXPORTS: Almost 130 Metric Tonnes During Jan-Feb 2013

Filed in Precious Metals by SRSrocco on May 17, 2013 1 Comment
 

There seems to be a great deal of the yellow metal heading out of the United States and into certain foreign countries lately.  According to the USGS, the United States exported 129 metric tonnes of gold Jan-Feb, 2013.  At this rate, total U.S. gold exports could reach 700-800 metric tonnes this year.  With the recent take-down in the price of gold in April & May, I would imagine the United States is more than likely going to reach that figure.

If we look at the chart below we can see just who received all this gold:

US Gold Exports Jan_Feb 2013

The figures in the chart represent gold in refined bullion, Dore’ & precipitates.  The U.K. received  7.4 metric tonnes in Jan and 11.5 more in Feb for a total of 18.9 metric tonnes.  Hong Kong came in second by importing a total of 40 metric tonnes (Jan-Feb) from the United States, while Switzerland received 43.5 metric tonnes.

More at: http://srsroccoreport.com/u-s-gold-exports-top-100-metric-tonnes-during-jan-feb-2013/u-s-gold-exports-top-100-metric-tonnes-during-jan-feb-2013/

Gold Dog's picture

Off topic..

...how many KB's can a posted picture be?

Whatever the Sam-Hell a KB is.

Thanks in advance!

Dog

Teach's picture

Arghhh!!!

And the beats go on...and on...and on.  Ain't sellin NOTHIN!  Friggin BULLSHIT!  Gold is ON SALE!!

Turd Ferguson's picture

I'm sitting here working on a

MODERATOR

I'm sitting here working on a new post about how I have a feeling that gold is about to get slammed and then I pull up the site and I see that it is.

FWIW, I think they're getting ready to take it all the way down to a full 38.2% retracement, which by my math is around $1290. Again, FWIW.

tpbeta's picture

Monkeys

Got a feeling monkeys will be whizzing over the Globex this PM. Be a good triple short bet on silver for gamblers with no regard for resistance levels.

Hammer's picture

Choice A Stock Market. Choice

Choice A Stock Market.

Choice B Bank deposit (0.000000000something)

Choice C mattress

Choice D Hard Assets (minus tax if sold or even if not depending on the asset)

Choice E Bitcon (sic)

ermmmmmmmm. You pays yer money (currency) you takes yer choice.

Oops forgot choice F

or choice G

Bugzy's picture

Gold leaving USA

So...800 Tonne/year is 1/10 of the allegedly USA unencumbered Gold, exported in 1 year!

Something is going to break and pretty soon at this rate.

If something cannot go on forever it will/has to stop.

Wonder what that will look like?

Urban Roman's picture

Hammer

How about "all of the above"? Diversify. 

Put some of your fortune in all of those choices. Then the question becomes allocation ..

Response to: Choice A Stock Market. Choice

Big Buffalo's picture

@Hammer

I'll like to add the following choice: ammo. I'm saying it now, even if you folks do not own a firearm, buying and hanging on to some ammo will not be such a bad idea. I would say 223, 22lr, 9mm, 40mm, and 45 acp are the way to go. Buy at the non-inflated prices though.
Of course land. And gardens. Gardens have an unbelievable return on investment. And its non-taxable (at least for now).
If you must buy pm, my bet is on the yellow horse.

Juggernaut Nihilism's picture

Re: 38.2% Retracement

Hmm... Turd thinks gold may have another 6% drop in it from here.  I'm sitting on 200 June $20 SLV puts purchased for .24, trying decide whether to start scaling out and taking profits.  I had a plan, but the takedown of the last two days is making me re-assess.

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