Chaos was seen in financial markets today as participants were thrown a
curveball when Switzerland surprised the world by removing its three-year cap
on the Swiss franc, unpegging it from the euro. This sent the undervalued
currency soaring and Europe’s shares and bond yields tumbling.
In just 13 minutes, from 0930 to 0952 BST, the franc collapsed by 30%.
Swiss shares fell more than 12% – their largest crash since 1987. Stock
markets around Europe fell with investors buying “safe haven” assets such as
German bunds and gold bullion.
Gold rose in all major currencies and approached a three-month high
following Switzerland’s unexpected decision to decouple its currency from the
euro.
In a chaotic few minutes on markets after the SNB’s announcement, the
Swiss franc jumped to a record high against the euro, rocketed nearly 30
percent in a few minutes. The franc broke past parity against the euro to
trade at 0.8052 francs per euro before trimming those gains to stand at 88.00
francs – it removed the 1.20 per euro cap it has had in place since late
2011. It also gained 25 percent against the dollar to trade at 74 francs per
dollar.
Gold in USD, 1 Day, January 15, 2015 – (Thomson Reuters)
The SNB ended a three-year-old policy designed to shield the economy from
the euro area’s sovereign debt crisis, prevent the Swiss franc appreciating
and pricing Swiss exports out of markets. The central bank lowered the
interest rate on sight deposit account balances that exceed a given exemption
threshold to minus 0.75 percent from minus 0.25 percent, it said in a
statement today.
This is likely a coordinated move by the SNB in conjunction with the ECB
in anticipation of a move against the flood of money that will likely
materialise with the ECB in Frankfurt looking likely to start quantitative
easing.
Gold in USD, 5 Day, January 15, 2015 – (Thomson Reuters)
Gold climbed on the news and bullion for immediate delivery increased 2.3
percent to $1,257.01 near a 12 week high, as the dollar weakened. Gold is
higher for a fifth day, the longest streak since June.
The move by the SNB is a dramatic one and smells of an emergency measure.
Ultra loose monetary policies are here to stay and the SNB actions suggest
loose money policies will intensify in the coming months.
The revaluation of the Swiss franc versus the dollar, pound and euro is a
harbinger of what will happen to those same fiat currencies versus gold in
the coming months and years. The Swiss franc is one of the safest fiat
currencies in the world but gold remains the ultimate safe haven asset and
form of money as has been seen throughout history and in recent years.
REVIEW
of 2014 – Gold Second Best Currency, +13% in EUR, +6% GBP
OUTLOOK
2015 – Uncertainty, Volatility, Possible Reset – DIVERSIFYToday’s
AM fix was USD 1,235.25, EUR 1,055.41 and GBP 811.76 per ounce.
Yesterday’s AM fix was USD 1,228.75, EUR 1,044.99 and GBP 808.76 per
ounce.
Spot gold
in Singapore was flat and yesterday spot gold fell $2.40 or 0.2% to
$1,228.00 per ounce yesterday and silver slipped $0.18 or 1.06% to $16.83 per
ounce.
