France's financial troubles are spiraling and starting to drag down the rest of Europe, while gold takes a breather despite a long-term bullish backdrop.

• Riots and political chaos in Paris have pushed borrowing costs so high that France now pays more to borrow than the US does, a stunning reversal that signals investors have lost confidence in the French government's finances.
• The pain is spreading: hedge funds are placing huge bets against the euro, Italy, Spain and Germany could get pulled into the fallout, and a weak euro combined with high oil prices threatens to make European energy even more expensive this winter.
• Germany is getting a double hit — Chinese electric cars and cheap exports are crushing European manufacturers (Volvo just announced major job cuts), and Nvidia's CEO bluntly told German officials that China has already won the manufacturing and tech race.
• Gold dropped alongside almost every other asset as investors rushed to raise cash during the panic, but money managers say the move is driven by short-term fear, not a change in gold's long-term story.
• The US isn't off the hook either — massive deficits and rising debt mean Washington's likely path is to weaken the dollar and cut rates rather than cut spending or raise taxes, a move that would eventually benefit gold.

Outlook: Expect more turbulence in European bonds and the euro in the near term, with gold likely to resume climbing once the current panic-driven selling fades.