Economic news in the last few days has been horrible:

• China’s PMI (the index of manufacturing activity, below 50 indicates contracted) as calculated by HSBC, hit 48.1, the lowest level in 7 months:

China PMI

• A new report commissioned by spain shows that Spain’s banks would need as much as 62 billion euros ($78 billion) in capital to withstand a worst-case economic scenario (article).
• Manufacturing grew in June at its slowest pace in 11 months
• The number of Americans filing new applications for jobless benefits last week did not improve
• U.S. “flash” manufacturing Purchasing Managers Index fell to 52.9 in June from 54.0 in May. (article)

We are seeing the economy to continue mired in weakness, driven by weakness in Europe, and global indebtedness and debt-bubble deleveraging.

The markets hoped for more talk of “money printing” from the Federal Reserve yesterday, but didn’t get it. The markets understand that without “stimulus” the economy is in trouble. The markets have become like a drug addict that needs its next drug-fix to function.

The markets needn’t worry. Another fix is coming. The answer for the global economic malaise and over-indebtedness has been prescribed by our policy-makers: money-printing. When things get bad enough, they will print. Meanwhile, volatility will be the order of the day as the addict fears for their next drug-fix.

Commodities have been especially pounded, on economic fears. Oil hit $78, after ouching $110 just 3 months ago:

Chart of Oil Price

Gold too is has sold off $40 to $1568, and silver down over 4% to 2680, matching its lows for 2011:

Gold Chart

Silver Chart

I can’t tell you whether or not we will see new lows in gold and silver, but my best guess is that we will not break the May lows. But be prepared…the summer is usually quite week through mid-august. However, when the stimulus hits, gold and silver will respond. This weakness is a gift for buyers, use this summer weakness to accumulate gold and silver, especially on selloffs like today.