Earlier this week, I suggested in a commentary that you watch closely as events in Brussels unfold (or don’t) today.  If you hold, or are contemplating holding, physical gold you might want to read ‘Is gold safe from Eurozone crisis?’ – reading time 4 minutes.

My interpretation of this article is that its author believes that good long-term fundamentals underlie  the physical gold price, but that since the price of physical gold is denominated in U.S.$ the gold price could drop (in the author’s words “anything can happen”) if there is a forced liquidation of financial assets such as occurred in and after September, 2008.  You will recall that in the months after August, 2008 investors and traders sold investible/tradable assets to cover margin calls, and for what they perceived to be the ‘safety of cash’.  The author of the referenced article, Mitchell Clark (described in the article as a “long-time analyst and contributor for Profit Confidential”), says three things that I believe are worth thinking hard about:

• first, he believes the financial markets are now trading on fear, and thinks that no asset class (by definition, physical gold being one asset class) is exempt from any price or other ‘eventuality’;

• second, he believes the ‘trading action’ now being experienced in the stock markets and precious metals markets is worrisome, and in his words “things are beginning to cascade”; and,

• third, irrespective of any other factor (corporate earnings, corporate cash on hand, etc.) he believes that if the Sovereign Debt issues (read Eurozone Sovereign Debt issues for the time being) are not dealt with that the financial markets will deteriorate from where they now are.  In this regard, he thinks that Eurozone politicians have “until Christmas to get a handle on things or the euro currency is finished”.

My comments:  I  do not claim expertise as a financial markets ‘expert’ in the context of daily or monthly financial markets fluctuations.  Intuitively, I believe that at a macro-economic level things currently are worsening in the Eurozone, the U.K., the U.S. (contrary to what most U.S. economists seem to think), and elsewhere.  I also think that over time that will negatively impact on the financial markets unless the macro-economic trend I think is occurring reverses.  I don’t see that happening given all that is ongoing in the world at the moment.  That said, I intuitively think that to suggest a deadline of Christmas for the Eurozone politicians (and other economic actors, including the International Monetary Fund) to bring resolution by way of ‘clear and certain’ strategy to the Eurozone Sovereign debt issues is unlikely – and I don’t see a collapse of the Euro or the Eurozone if that doesn’t happen by Christmas.  In this regard, if Clark turns out to be right, I think the Christmas season will prove to be ‘less than festive’ for all of us.

Again, watch for announcements or ‘lack of announcements’ out of Brussels today.

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