A resolution to Europe’s debt problems would very clearly drive gold prices higher. Significantly higher even as inflation expectations would be ramped up in anticipation of the monetization of the debts of Europe’s at-risk Sovereigns, their shaky banks and the many member institutions.

If only the intentional wishes of “Global Investors” could be met by that group.

Who, you say?……..and does Europe really care about outside investors let alone respond to their concerns?

And since when do the partners answer primarily to outsider demands anyway and are we all really being realistic in our expectations considering all the conflicting messages from the policy makers of Europe these past few days?

I am very worried tonight.

Worried that the weaker states within the union have presumed (based on recent news) that there will be an acceptable solution to their many debt worries based on investor expectations around the world…..and that the prospect of solutions means they can play hard-ball with the core countries at the last possible moment (to get a better deal).

Investor optimism is sinking the possibility of a real deal.

The market, of course, is waiting for a clear signal that Merkel and Sarkozy can engineer a recovery on a fiscal/political union for the EZ on a revised or amended agreement and thus free up the ECB to act decisively on behalf of all the primary members and their weakened banking sector.

But this hope is now been killed by expectations alone.

We all just assume an agreement will allow the ECB to monetize the debts of distressed nations such Greece, Portugal, Spain (and now Italy too, much as the Fed has done in the US) and therefore bring an end to the solvency issues that are currently sinking the Union as rising interest obligations smother growth.

We are assuming there will be a quick solution since failure is clearly not an option. The global economy is breathless awaiting a European agreement and yet Germany still stands apart.

I worry we have gotten ahead of ourselves….that too much pressure has been imposed on Germany, on France, on Angela Merkel and Sarkosy and their governing parties. We have not allowed time itself to play a role here.

The problem is that there is still only the mere suggestion of an impending crisis. But there is not an actual crisis yet. Can you all see that? Most seem to believe that the market has already fully discounted the risk of a European break-up. I think they are wrong.

There is plenty of downside ahead if meetings do not pan-out as expected.

I would now advise caution. The shock and awe solution is no longer on the table at this late stage and my bets on Europe are “off” as cold water is being thrown on the whole process.

Bad news could see a seriously negative outcome come next Monday and it looks to me now that bad news is indeed coming. The threatened credit-downgrades themselves suggest that this play has several more acts to follow before the curtain finally falls and the fat lady sings.

As I now see it, there is no longer enough time left to orchestrate a satisfactory Euro-recovery package that will truly satisfy investors (unless a secret deal has already been cut….and that is not very likely given the extreme focus of the media on the major players these past few days).

I certainly cannot advise anyone else what to do. I no longer have faith that a good outcome awaits in the very near term. There is much work yet to be done and time has run out. The Euro, as usual, is a work in progress. It cannot be rushed.

Not even by the big ratings agencies.

Threats of credit downgrades do not matter within the next thirty days at the outside and in fact this additional defined time period suggests that the Europe’s leadership has simply gained more breathing room to hash out solutions before the big show begins.

It is still coming though. Crisis first. Deals later.

Uncertainty meanwhile is just too high and I now anticipate the Euro will fall in the near term as a result with the dollar rising (possibly sharply) and gold to be left an orphan this coming week.

Commodities will therefore likely decline in the absence of an agreement on European fiscal unity as uncertainty over global growth prospects diminish. A failed Europe means China and much of Asia will suffer most exactly when they are already slowing and GDP there is already in decline.

This cannot work to enable the hopes or prospects of resurgent growth in the global economy nor does it help the other major ailing economies of the West such as the US, Canada, England and Australia. I could be wrong but the logic now dictates shorting for Monday. Only an eleventh hour breakthrough can save the day and I cannot see it happening anymore.

So I am out. Sorry. But the vibe is all wrong.