Well, the grand solution that was so eagerly and anxiously awaited by global markets and investors from the EU was finally delivered overnight. However, the plan is neither grand nor does it offer a final solution to the problems that continue to plague the region. One, more concrete, item that the meeting yielded was the addition of 200 billion more euros to the ammunition pile with which to combat the debt maelstrom. Aside from that, there is very little lipstick that sticks available to place on this porcine, at this juncture.

While we can now talk of a fiscal union of sorts, the fact that the UK and three other nations have opted not to throw in their respective hats into the fiscal wedding 'ring' is indicative of perhaps more pain to come -at least on the political front. President Sarko' wasted no time in blasting Britain's David Cameron for being a holdout. For his part, the British PM remained adamant that interventions into the national budgets of some nations by others are more loathsome than black pudding.

Don't look now, but the ultimate (yet, by now the fifth) agreement to save the union and the common currency are not playing very well with those who have sizeable money at stake. Quietly, or perhaps not so quietly, a number of European chief executives have been slip slidin' away their dough into...Germany. Obviously, at least as certain Spanish CEOs are concerned, the possibility of a fragmentation of the euro and a return to peseta is not comforting when millions are involved. A growing number of corporate chiefs in potentially affected countries have either moved money to Germany, are planning to do so, or have set up 'plan B' blueprints for moving headquarters to Scandinavia or to shut down altogether. Grand Accord? Yeah, right they say.

The blueprint that was delivered after the all-nighter in Marseille by the aforementioned members of the EU places the burden for action upon the ECB at this point. Markets appeared to react with tepid, barely-heard 'applause' to the accord on the fiscal front. In fact, aside from some mild gains in European equities and Dow futures, plus a few assorted knee-jerk corrective advances in the commodities that got clobbered on Thursday, the niche that matters most- Italian, Spanish, and other bonds- showed that yields continued to climb even after the Marseille marathon meeting.

To make matters worse, Moody's kept up the ratings machete action and lowered the status of BNP Paribas, Soc Gen, and Credit Agricole this morning, noting that liquidity and funding conditions have deteriorated significantly for them. The downgrades of the trio place France's AAA rating at risk even more in the wake of an already-issued red flare this week by S&P. France's top four lenders are thought to be some 7 billion euros short of adequate capitalization at this point.

Asian stock markets on the other hand finished the week on a sour note as they did not interpret the fiscal union to be comprehensive enough for their tastes. Miners in the Aussie market got clobbered especially hard (BHP Billiton and Rio Tinto among them). At the end of the day, the Marseille Accord leaves a lot of questions unanswered, and that is the nebulosity that the markets are reflecting today. We warned in a The Street.com video clip yesterday that with optimism having been stacked so high on just one side of the table, the markets (esp. gold) were potentially setting up for disillusionment today. That, so far, appears to be the case.

The agreement has made for EU leaders wading into thoroughly uncharted legal waters at this point. Nobody knows how you pull off tougher budget rules at this point. Market players are still wondering if the penalties on future deficit offenders will stick as well as who will dole such sanctions out and via which legally-sound means. It also remains uncertain just how the region's governments will deal with the boosting of the rescue funds via the IMF.

Spot gold dealings had lost nearly $38 on Thursday and closed near their lows for the day, threatening to breach the $1,700 price support. This morning's near $10 opening advance to $1,715 per ounce represented perhaps in part a response (and a small one at that) to the EU's fiscal accord but more likely a minor corrective bounce in a market that still has the euro trading at $1.33 and the US dollar unwilling to roll over and fall on a sword. One would have expected a truly grand celebration ($75 or more) in the yellow metal's trading space on the back of the be-all end-all agreement that was cobbled together in Marseille.

Once again, it might be safer to say: Dude, where's my rally? this morning. By the 9 o'clock hour in New York, gold was seen as struggling to remain above $1,710 the ounce, instead. Once again, those who have little in the way of clues as to the market will come out of the woodwork and blame 'sinister' intervention on the part of certain entities as the cause for such price behavior. Sorry, but there are no crop circles to be found and/or interpreted in this market. Yesterday the blame for the wallop in gold was laid at the conspiratorial feet of the BIS, the ECB, the IMF, and...the Fed (!). Whacking gold is not the Fed's business, we remind. The US Treasury in fact in charge of the US stash of the shiny stuff.

Kitco News' Allen Sykora reports that A background factor pressuring gold Thursday was apparent significant lending of the metal by institutions looking to raise U.S. dollars, says HSBC. Gold fell with the euro after the European Central Bank president nixed speculation that the ECB would support the currency by stepping up its sovereign bond-buying program. There was investor disappointment in a broad range of markets, with equities and commodities falling. The gold price declines were so rapid and extensive that some investors theorized that central banks-including the Federal Reserve-were actively selling gold, HSBC says.

HSBC tried to further clear the air and noted that Unlike most central banks, the Fed does not have access to U.S. gold reserves, which are held by the Treasury and can be sold only on the instructions of the Treasury secretary. Rather, we believe it is more likely that gold lending by European commercial banks was interpreted as central-bank selling. This is in keeping with persistently negative gold lease rates, which indicate substantial lending of gold by banks in return for USDs. Gold leases are at their lowest levels since 1998, when gold reserves were being mobilized by South Korea at the height of the Asian financial crisis. Until funding difficulties at European banks are resolved, it is difficult for us to see any near-term halt in gold lending. This may help keep gold prices on the defensive.

Silver gained 31 cents to open at three pennies under the $32 mark but its early rise did not appear to be imbued with a lot of energy either. We had mixed openings in the noble metals space; platinum rose $5 to the $1,498 level while palladium fell $2 to the $669 figure per ounce. Rhodium remained at $1,500 after having shed $50 in the most recent session. The greenback traded at 78.77 on the index this morning while crude oil was in suspended animation at $98.45 per barrel. About the only notable advance in values this morning was in copper, which climbed 1.5% on account of news that China's inflation showed a dip and that its copper output fell 4.5% in November.

The $200+ discount in palladium versus gold continues to draw attention from certain ratio-based traders who do not anticipate the now historic price inversion to last for very much longer. In fact, one asset manager, Jess Gaspar (he of Commonfund Asset Mgmt.), speaking at the Inside Commodities Conference in NYC said that platinum could be poised to rise on the back of improving sentiment and the ebbing of the supply chain disruptions that was caused by the Sendai quake in Japan back in March.

At this point, the best thing that can be said that we can shut the box marked 'anticipation' for a while and concentrate on the one labeled realization in coming weeks.

Have a pleasant -if still uncertain- weekend,

Jon Nadler Senior Metals Analyst 

Kitco Metals Inc. North America

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