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Draghi lit the markets' fire with hot money pledges in Europe, but the metals were firmly capped.
This is standard operating procedure, especially on the day before a Non-Farm Payrolls report.
Intra-day commentary on single currency monetary theory and political organization here. It amazes me how few people seem to understand this. A single currency, which therefore dictates a single monetary policy, cannot span a political geography that does not have a tightly unified fiscal arrangement including transfer payments and revenue adjustments to accommodate regional conditions. Period.
This is why the push for a single world currency, while maintaining the promise of national independence, is a malignant myth of the would-be money masters.
Bill Gross says he prefers gold to bonds. Directionally correct, but his choice of investment instrument (GLD) is probably more risky than he realizes.
The ADP employment report came in well this morning, all things considered.
But it was all about Mario Draghi and the ECB, and their pledge to buy short term sovereign bonds in a purportedly unlimited manner. Since the purchases will be done in the secondary market, and will be sterilized, there is thinking that the German court will find no objections when they meet on September 12.
No matter in what brand of paper you might wrap this fish, it still smells of monetization. And it is primarily designed to benefit the big banks, and not the ordinary European. So it will most likely fail without meaningful systemic reform.
This is just Bernanke, Italian style.
Non-Farm Payrolls tomorrow.
Now that Draghi has joined with Bernanke in buying the short end of the curve, pushing rates to negative returns, gold looks quite a bit better in terms of risk and reward.
Gold thrives in an environment of negative bond returns.
And since no action is being taken to reform the unsustainable banking system and the broken real economy, we can expect this monetization, under whatever guise or names one may wish to apply, to continue until something breaks.
Barring a major outbreak of war or other draconian actions by governments, and a major liquidity selloff in the financial markets, gold seems to have upside to $3,000 or so, and perhaps more. But it may take some time to get there. There are no free markets in this period of extreme monetary experimentation.
As for silver, that is harder to predict, given the demand/destruction from its industrial character, and the long term investment deficit created by the suppression of price which discourages investment.
I don't really see the CFTC taking on JPM over their silver short manipulation, or HSBC in gold for that matter, since it is likely that the governments are involved as well. But stranger things have happened.
Some gold advocates of my acquaintance were complaining that Mr. Gross is looking at GLD rather than a straight up bullion purchase. I think that is a bit unrealistic given the size of his fund and the scope of the potential demand, not to mention his position in the 'financial establishment.' One must bear in mind, however, that when a whale like Bill Gross speaks, he is wearing a 50,000 watt megaphone compared to most. So we ought not to discount the importance of what he says.
And who knows, he may already be invested in GLD and is now talking his book.
But I share the distrust that some have of GLD and SLV except as a short term paper exercise. Any failure of those instruments due to malfeasance would provide a leg up for the metals that would be rather impressive.
