Stocks fluctuated in the European session after a strong Asian session a Germany reiterated it would not accept issuance of Eurobonds. Commodities traded narrowly so far today but oil prices softened slightly. The front-month contract for WTI crude oil price slipped below 85 after rising to a 5-day high of 87.37 and settling at 85.35 last Friday while the equivalent Brent crude contract moved steadily after around 108. Gold gained supports at around 1725/30, suggesting robust demand for safe-haven assets.

Finance Minister Wolfgang Schaeuble said it's not feasible for the 17 European nations to jointly issue bonds as long as each nation runs its own fiscal policy. He described Eurobonds as a 'wrong way' out of the crisis and issuance of which would mean that 'everybody shares the same interest burden which would be a punishment for (financially) sound nations'. The spokesman of Germany's Chancellor Merkel stressed that 'Eurobonds won't be an issue at the meeting tomorrow in Paris'.

One of the reasons for gold's resilience despite the pickup of risk appetite was that world central bankers are looking to depreciate their currencies. The SNB and the BOJ are ready to intervene in the currency market so as to curb their currencies (CHF and JPY respectively) from excessive appreciation. The Swiss media said that the SNB may set a possible franc target in coming days. In Japan, Finance Minister Yoshihiko Noda pledged to 'take bold action if it becomes necessary', signaling the government may intervene the market again.

For other countries that are not explicitly fighting against appreciation, the central banks are extending/expanding monetary easing. The market is currently awaiting Fed Chairman Ben Bernanke's speech at Jackson Hole next week as he may give more details about QE3. In the UK, Chancellor of the Exchequer George Osborne said last week that the country's recovery will 'take longer and be harder' while the BOE revised down the growth forecasts. Policymakers also indicated that stimulus measures will be introduced should the economic deteriorate further. Quantitative easing is an indirect form of money printing and it helps weaken a country's currencies. In a situation where most free-floating currencies are being depreciated, gold appears to be the ultimate safe asset for investors.