The Daily Nugget: August 3, 2012

” - Zerohedge

Despite his heartfelt comments last week in London, Draghi let the markets down yesterday by saying the central banks may act in a few weeks.

It was almost sad watching Draghi try and hold onto his Superman cape whilst the markets and journalists tried to wring it round his neck, so angry they were with his lack of action. He sounded desperate when asked "What is the real meaning that the currency is irreversible?" His response was that "We are not going back…It is pointless to fight against the Euro, pointless to go short against the Euro because IT WILL STAY!"

As soon as the markets realized Draghi was all hot air then everything fell, somewhat of a gift to those who buy gold bullion as the gold price dropped, creating yet another buying opportunity.

Central banks are just being plain cruel to the markets now. They pumped all that money over the last few years, implemented all sorts of peculiar plans telling everyone that they needed it and to eat it up. And now everyone’s hooked but the next fix isn’t coming as promised.

We all know that the ECB have to act, just look at the manufacturing numbers released yesterday – manufacturing is growing at its lowest rate for 3 years. But just how they will act is up for debate. It seems to be a case of the Germans versus the Mario brothers at the moment though as to what the next move entails. The Marios want to see the ESM with a banking license, i.e. they want a license to print money. The Germans, lead by Jens Weidmann, aren’t standing for it.

So amidst the market disappointments yesterday the gold price went below $1600. No-one should be surprised; gold has fallen, and then picked itself back up, after every FOMC announcement this year, except for January. Does this mean it’s a lost cause?

Not at all. As we say, we know that Draghi and pals will have to act. If they don’t, they’re out of jobs, so it’s guaranteed they won’t be giving up just yet. The only way they can act is debasement. We know all roads lead to the crumbling of the euro, and the other fiat currencies. But when this will happen, who knows, but when it does be glad you chose gold investment.

Well, whilst everyone was watching Draghi and Bernanke, they had their backs turned to the "voracious" appetite seen in Asia for gold. South Korea’s central bank reportedly added 16 tonnes to their reserves. The WGC reminded us earlier this week that central banks are keeping up with their record gold purchases last year. In Q1 this year net purchases from central banks totalled 80 tonnes, well on their way to matching the 450 tonnes bought last year.

The weekend’s coming up so nervous investors can relax, but not before the US nonfarm payrolls data is released later today. Predictions indicate it will show sub-100,000 jobs growth, pushing up the unemployment rate from its current 8.2% level. So then we’ll all be expecting the next FOMC meeting in September to get QE3 rolling and the nervousness in the markets starts again…