The Daily Nugget: August 7, 2012

Bickering and interfering continued across Euro countries yesterday as smug French President Francois Hollande purportedly pushed for Italy to accept a bailout. We wonder how he’ll react when others are "advising" him when his socialist policies go down the toilet faster than everyone else’s.

German foreign Minister, Westerwelle. meanwhile also weighed in on the should they/shouldn’t they debate regarding rumours of money-printing, stating some of the tones coming out of the ECB were “very dangerous.” It seems these German politicians are getting more likeable by the day as they desperately try to slowdown the descent into history repeating itself. We suspect this is too little too late though.

Yesterday the Sentix Confidence Index showed investor sentiment in the Eurozone had fallen for the fifth month in a row to -31.0, down from 29.6 last month.

The Sentix Confidence Index rates the relative six-month economic outlook for the eurozone. Despite it’s "higher" than expected rating (-30.3 was expected, that 0.7 (0.3?) means a lot to economists), it remains well below zero, showing that increasing numbers of investors and analysts are feeling bearish when it comes to the eurozone. This may change if the ESM is given the ability to print money, but only in the short-term. Both long-term and short-term it will purely lead to fast devaluation of the currency – something which the gold price will respond nicely to.

The main highlight of yesterday was yet another speech from Bernanke. The markets almost stalled in anticipation of the pre-recorded speech, just hoping for the briefest hint of further easing. But they were once again disappointed as he failed to mention monetary policy, or in fact anything of any use to anyone. The conference he addressed focussed on economic measurements. So it was hardly surprising that he didn’t make any big announcements.

Bernanke’s speech was, in a few words, insulting and frustrating.

He simply told us that economists were measuring the wrong things. In some ways we agree, the incessant need of economists to focus on specific numbers is pointless. But this wasn’t Bernanke’s point, his point was he was fully aware, thank you very much, that many citizens are suffering but unfortunately those pesky statistics which economists insist on measuring and use for reporting are not helping him do his job.

Instead economists need to focus on more microeconomic data and perhaps use psychology and neurology to quantitate human decisions and behaviour.

Ultimately Bernanke’s speech was a load of empty words. The markets knew it, he knew it but he had nothing else to say and nothing else to offer.

He pretty much pulled a Draghi on us. Whilst there was little hype before the speech Bernanke was fully aware that the markets wanted to hear something. There was not even an attempt to placate them, instead he tried to distract us with something else.

Gold dropped slightly at the time of his speech but otherwise held its own and climbed to $1,611.20 showing that the yellow metal knows he’s as full of rubbish as the rest of us do, we just need everyone else to catch up. This is all promising for gold which can only be thrilled when central bankers start pointing the finger elsewhere. As Jim Grant articulated previously – the gold price in the inverse of confidence in central bankers.

Of course, Bernanke is also set to speak later today – Stand by for take-off!