It is potentially a black swan but amazingly the market has simply ignored it till now. We are going to witness another major referendum in Europe on the coming Sunday, Dec 4. Italians will cast their vote to decide if they want to keep the current government (pro EU), or not. If the latter, the current government will step down and likely the extreme leftism party will come into power that will push for an Itaxit. As such, the Euro zone may likely be dissolved soon. Sounds like a very serious threat to EU but no one seems to care about it. Maybe the market has seen too many such drama this year and is tired of reacting to it?
I of course don't know what the referendum will be but I'm trying to hypothesize how the market, especially gold, will react to the result. After some mind exercises, I come to the conclusion that gold will likely respond positively to either result. Why? Well, my rationing is simple: if the result is yes to support the current government, then the threat to EU is gong and likely Euro will rally. A rallying Euro will weaken US$, which should be good for gold at least in the short term. On the contrary, if the result is NO and EU may be facing a risk of dismantle, it should be a huge risk for the whole financial world and I think gold should be even more a safety heaven on such a highly uncertain situation.
Technically gold appears to be in a bottoming process and can start to run higher soon if not immediately. The Italian referendum may provide an excuse for it to start its next leg up. Let's see if my theory will come true in a few days.
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