On this “Turnaround Tuesday,” the day after the mother of all stabilization programs, global investors took some time to reevaluate the impact of that $1 trillion European financial rescue plan and decided that the yellow metal glittered with opportunity.

The market enjoyed a headline-making move higher yesterday, although investment strategists remind us that we can chalk up most of that surge to people who were short stocks over the weekend rather than new buying.

Or, to put it another way: A lot of the pinstriped “smart money” logged off from their Bloomberg terminals on Friday afternoon and got caught short heading into Monday’s session.

Heading into Tuesday, strategists note, investors reconsidered the impact of the credit rescue package on the long-term solvency of the various weak governments in the eurozone as well as new data out of China showing an increase in its annual inflation rate to 2.8%, suggesting that the boys in Beijing will continue to tighten up.

As we scribble here, the SPDR S&P 500 ETF (SPY), which includes holdings such as Exxon (XOM), Microsoft (MSFT), Apple (AAPL), General Electric (GE), and Procter & Gamble (PG), has been seesawing between gains and losses, now down 0.3% in afternoon trading.
The iShares S&P Europe 350 Index (IEV) is down 0.6%.

Market pundits are quick to point out that the problem with the debt guarantee/fiscal bailout program rests in the fiscal discipline that countries in Europe would have to adhere to in order to secure the EU-IMF financing.

This, they say, would mean slower growth, which would of course also impact our own economy on this side of the Atlantic. As we pointed out yesterday in The EU’s Panacea Is Problematic, one-quarter of American corporate revenues are derived from the eurozone.

On this point, we also thought the recent work of Gluskin Sheff’s David Rosenberg was kind of interesting. He did some analysis this morning on how the economies of the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) would fare if deficit-to-GDP ratios were to revert back to the Maastricht criteria of 3%.

The adjustment will be painful for Europe in general, Rosie writes, slicing off about 1% GDP growth annually over the next three years, and very painful for the PIIGS specifically.

If these countries’ fiscal ratios were to return to 3%, Ireland would see four percentage points (ppts) shaved off nominal GDP annually over the next three years, Greece 3.5ppts, Spain 2.8ppts, Portugal 2.2ppts, and 0.8ppt for Italy.

Nouriel Roubini, Dr. Doom himself, touched on this very point, noting that the program put in place by the bureaucrats in Brussels requires fiscal austerity and higher taxes, curtailing growth and possibly extending financial tough times.

The prominent bear now forecasts an increased risk of a double-dip recession in Europe. (Hat tip: Yardeni Research).

So, what is working today?

Gold, which is trading strongly above $1200 per ounce and, pros emphasize, trading even stronger in terms of foreign currencies. The yellow metal hit an intra-day high today of $1225.

Bill Downey, in his article What’s In Store for Gold After the Euro Bailout, does argue that there is now the potential for a short-term pullback here.

“[L]et's not just shake off a $750 billion infusion and such a coordinated effort over the short term,” Downey says, adding, however, that the printing of currency and the plunging into further debt of sovereign nations is certainly not a recipe saying "sell gold."

For his thoughts, we also put in a call to metals maven Bill Fleckenstein of Seattle-based Fleckenstein Capital. He remains a dedicated gold bull.

“The world is figuring out that what we call money is just colored paper,” says Fleckenstein. “There is no intrinsic value there and all these currencies are now being watered down to be made worth less over time. The world is getting in on the joke: You cannot print your way to prosperity.”

Fleckenstein is long the metal and the miners, where he has become increasingly bullish over the past 12 months. “I thought the dynamics were such that they could start producing a good deal of cash flow and earnings,” he says.

Specifically, Fleckenstein owns Newmont Mining (NEM), Goldcorp (GG), and Agnico-Eagle Mines (AEM).