(As written for My Paper on 12 December 2011. Click here to enlarge)

The recently concluded EU Summit in Brussels last week answered some tough questions.

Here’s some of the highlights:

1. War-chest topped up with 200 billion Euros

The Eurozone’s central banks will contribute 150 billion Euros, while non-Euro EU states will chip in the remaining 50 billion Euros. Part of the plan is to calm global fears and attract rich nations like China to join in the rescue.

China’s response though, was muted and non-committal with Foreign Ministry spokesman Hong Lei saying that “we note Europe’s important proposals to deal with the debt crisis.”

2. New Rules Instead of New Treaty

The European leaders set a deadline of March 2012 to write a new pact on economic governance to limit future budget deficits and public debt.

This is not a full treaty revision – which would require the unanimous nod across all 27 EU members – because Britain opted out. U.K. Prime Minister David Cameron refused to back the pact without ironclad guarantees of a British veto right over future financial regulations.

Strangely enough, this could turn out to be a blessing in disguise, as rewriting the EU treaty could take years and underscore an immediate plan required to stem the European crisis.

3. The “Golden Rule”

The “Golden Rule” requires each country to establish an “automatic correction mechanism” when budgets run off-course. The rule also caters for disciplinary procedures and controls to kick-in when governments overstep the deficit limit of 3% of GDP for annual borrowing and 60% of GDP for total public debt.

All these moves are in the right direction to reign in sovereign debt.

As it is, European governments face maturing debt of over 1 trillion Euros by the end of 2012 and more than half of that amount will be due by June next year. Interestingly enough, that amount is owed by Europe’s 3 largest countries – Italy, France and Germany.

Can the Euro be saved?

That question ultimately depends on 3 important groups: investors, central bankers and credit-rating companies.

Top News This Week

GBP Retail Sales m/m. Thursday, 15 December 2011, 5.30pm. I expect figures to come in at -0.2% (previous figure was 0.6%).

Trade Call

Long XAU/USD at 1670

Gold has risen 21% to $1,717.80 an ounce this year on the Comex in New York, and reached a record $1,923.70 in September 2011.

Last week, Wagers on Gold has also climbed 3.5% 151,347 contracts, snapping two weeks of declines. Bullion traders are piling into Gold to protect their wealth from Europe’s escalating debt crisis. Even South Korea announced last week that it bought 15 tons of Gold in November to diversify its foreign-exchange reserves.

On the daily chart, a bullish pennant is spotted.

An entry is taken at 1670, and a protective stop is placed at 1599, just below the previous low of 1603.71 achieved on 20th October 2011.

We will have 2 profit targets on this trade. The first position will exit at 1740, and the second position will exit at 1810.

Entry Price = 1670
Stop Loss = 1599
1st Profit = 1740
2nd Profit = 1810