September’s Gold-en surprise

September’s gold price movement has been a study in contrary trends.

While gold reached $1,900 on the 2nd and has cascaded downward $243 to Friday’s close at $1,657 on the spot market.

While European banks from Germany, France and Belgium are teetering on Greek default concerns the liquidity trap from overnight lending in dollars has been the main driver, US hedge funds have also been big sellers especially this week.

Hedge funds threw out many babies with the bath water this week due to covering margin calls on leveraged bets. Gold is a case in point, but Apple and Google also suffered sell-offs.

Given the fall in gold prices, late Friday’s 23 percent rise in margin requirements by the CME does not make sense, unless we have something afoot for Sunday into Monday.

There is a strong possibility of a major market moving event very soon. Why else would you dramatically raise margin requirements on all precious metal including silver and platinum?

Is there a Greek default or a European bank being nationalized? Perhaps, lord knows there are many candidates from Dexia, SocGen to Morgan Stanley.

I am giving fair warning that tomorrow or Monday may see soaring volatility  and therefore a need to suppress gold prices. This volatility will not be an outright liquidity squeeze so there in lies the need to squash gold and silver.

9/11: My Take

Now that the “festivities” are complete with three-day extravagaza finished, I would like to offer my comments on the day some 10-years ago.

First, I lost three people I knew very well and I grieve for all the families that lost loved ones.

I have three questions that do not seem to have answers in any investigations.

One, how did the towers come down? Office furniture, paper, wallboard and carpet do not burn hot enough to melt steel. Jet fuel does not as well, and was only burning the first minute, which then set off the building contents. Jet fuel explodes it does not have a slow burn.

Second, where did the towers go? When they collapsed they formed a ten-story pile, there was far more matter making up the building than what was in the pile? What was the dust that covered Manhattan? Pulverized concrete? How does that much concrete get pulverized? Any demolition creates some dust but not on the scale we endured ten years ago.

Lastly, where was the tail section and wings outside The Pentagon? They say it was a plane yet the hole in the building suggested a missile, no marks where wings created damage to building and no plane parts on the lawn.

I do not know who is responsible for this act, however I do not believe the official story.

These are three basic questions, which should have an abundance of proof in the reports on the “attack” and yet I have found no answers.

I thank you for your indulgence on this.

Europe’s PIIGheadedness

One crazy week begins with global markets getting creamed without US markets trading.
Labor Day afternoon shows the beginning of the cratering of the EU. Greek bonds show default is almost certain with 2-yr bonds at 52% yield.
Italian bank stocks and CDSs are moving in opposite directions. Equity prices at year lows while cost of capital to banks has risen to new highs.
Other EU banks in Spain, France and Belgium having difficulties accessing overnight funds, aka 2008.

Stefaan Decraene CEO of Dexia, the second largest bank in Belgium behind Fortris has resigned. Dexia has been labeled as a troubled bank for the last six months.
German banking execs including Deutsche Bank’s Ackmann preaching that a bailout is needed as many EU banks cannot price sovereign bonds on market-to-market basis because they would be labeled insolvent for their exposure.
Spot gold prices closed above $1,900 an ounce on fears that EU banks will be shuttered before Jean-Claude Trichet can get a Union bond offering together. The bond may be backed by gold in some weight, whether it will be 50% backed or 5% backed, which is the level far more likely to be enacted because there is not enough of the precious metal to do any larger level for the amount of funds needed to bailout the Euro.
I would say the future of the euro is bleaker and could be severely altered or even gone by year’ end.