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Catalonia's Suspended Autonomy and Gold


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Spains central government said that it would suspend Catalonias autonomy on Saturday. What does it imply for the gold market?

As weinformed on Tuesday , Madrid set Thursday morning as the ultimate deadline for Catalonia to declare independence or its willingness to remain a part of Spain. But Catalan president Carles Puigdemont ignored the deadline and did not clarify his position. Instead, he wrote a letter to Rajoy, threatening with a formal declaration of independence in the regional parliament:

If the government continues to impede dialogue and continues with the repression, the Catalan parliament could proceed, if it is considered opportune, to vote on a formal declaration of independence.

In response, the Spanish government is to suspend Catalonias autonomy on Saturday. In a statement, the central government wrote:

At an emergency meeting on Saturday, the cabinet will approve measures to be put before the senate to protect the general interest of Spaniards, including the citizens of Catalonia, and to restore constitutional order in the autonomous community.

Although the crisis over Catalonia deepened (importantly, two pro-independence organizers, Jordi Cuixart and Jordi Sanchez, were imprisoned on Monday), investors were unmoved. Actually, the euro rose against the U.S. dollar yesterday, as one can see in the chart below. So the price of gold increased as well.

Chart 1: EUR/USD from October 17 to October 19, 2017.

EUR/USD from October 17 to October 19, 2017

It implies that the uncertainty about Catalonias fate has been already priced in, at least unless something really bad happens. It might be also the case that investors believe that Madrid will finally deal with the problem and Spain will not split up (especially given Puigdemonts hesitation). It is also worth remembering that traders are now focused on the upcoming ECB meeting, which can be a turning point for the banks monetary policy.

To sum up, Puigdemont ignored another deadline set by Madrid to clarify his position on Catalonias independence. The central government is to trigger Article 155 of the Spanish Constitution to suspend Catalonias autonomy. Although the euro and gold shrugged off the deepening conflict about Catalonia (actually, both assets appreciated yesterday), we could see some volatility during the weekend and in the aftermath. The Spanish central government may trigger Article 155, whileJapan will hold a parliamentary election . Stay tuned!

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Thank you.

Arkadiusz Sieron, Ph.D.
Sunshine Profits Gold News Monitor and Market Overview Editor


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About the author


Arkadiusz Sieron is a certified Investment Adviser. He is a long-time precious metals market enthusiast, currently a Ph.D. candidate, dissertation on the redistributive effects of monetary inflation (Cantillon effects). Arkadiusz is a free market advocate who believes in the power of peaceful and voluntary cooperation of people. He is an economist and board member at the Polish Mises Institute think tank. He is also a Laureate of the 6th International Vernon Smith Prize. Arkadiusz is the author of Sunshine Profits’ monthly Market Overview report and daily Gold News Monitors, in which he keeps subscribers up-to-date regarding key fundamental developments affecting the gold market and helps them prepare for the major changes.

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