Archive - Sep 2011 - Story

August was a very turbulent month for markets with equities falling sharply and commodities mixed on Eurozone and US sovereign debt concerns and concerns about the health of the US and global economy.  For many markets, Augusts’ savage sell-off has been the worst since the October following Lehman Brothers’ implosion and investors diversified into havens such as high credit government bonds and gold.  Gold again proved its safe haven status recording strong gains in the face of turbulent markets globally.

Below is a summary of the leading news out of Europe which once again is at the forefront of the action, send risk far lower following the latest reminder that the continent is not only insolvent, but that its economy needs far more debt to even stay unchanged.

Following last night's latest sub 50 Chinese PMI reading (August HSBC PMI at 49.9 following 49.3 in July), it was Europe's turn to spook the market after the Eurozone PMI printed at 49.0- the lowest in two years, versus an estimate of 49.7 and a prior reading of 50.4, with the global recession accelerating regardless of what a few factories in Chicago have to say. Spanish and Italian PMI tumbled from 45.6 to 45.3, and from 50.1 to 49 respectively, coupled with a surprising drop in German PMI which dropped to 50.9, from 52.0. As Bloomberg's David Powell said, revised final manufacturing PMI for August shows that economic weakness has spread from the periphery to the monetary union as a whole and may contribute to a widening of intra-European sovereign debt spreads, especially those of Italy and Spain. Sure enough just as he said that, Spain auctioned off a miserable 5 year bond in which it sold just E3.62 billion out of a maximum target E4 billion, with a stunning plunge in the Bid To Cover which came at 1.76 down from 2.85 despite implicit promises of ECB purchases. This led to the EURUSD dropping to under 1.43, Spanish CDS blowing out by 10 bps, and, sure enough, the ECB intervening promptly by buying up Spanish bonds in the secondary market to prevent a market collapse. All in all, we have all the makings of another 10 point no volume levitating melt up in the S&P, as global recessionary news promises more easing from the cartel.

Earlier today, we were delighted to see that after years of ridicule and provocations, the SPDR GLD ETF finally cracked and decided to do a wholesale PR campaign to comfort the investing public it actually does own its gold, by inviting none other than Bob Pisani in its secret warehouse which allegedly contains 40 million ounces of gold, of which HSBC is custodian and the Bank of England (the same Bank of England which will soon be about 99 tons lighter in gold content once it satisfies Hugo Chavez' physical delivery request) and London Bullion Market Association (“LBMA”) are subcustodians. While the 4 minute PR campaign is enjoyable and we invite readers to watch it, what is amusing is that it is sure to set off another set of conspiracy theories. Here's the reason: amusingly the very gold bar that Pisani demonstrates so eagerly for the camera, Rand Refineries ZJ6752, is somehow, at last check, missing from the full barlist as posted daily by the GLD.Whose is it? Where did it go? When was this clip shot? Inquiring minds want to know...