Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18
Gold Miners’ Status Updated - 13th Jan 18
Gold And Silver – Review of Annual, Qrtly, Monthly, Weekly Charts. Reality v Sentiment - 13th Jan 18
Gold GLD ETF Update.. Bear Market Reversal Watch - 13th Jan 18
Stock Market Leadership In 2018 To Come From Oil & Gas - 13th Jan 18
Stock Market Primed for a Reversal - 13th Jan 18
Live Trading Webinar: Discover 3 High-Confidence Trade Set-Ups - 13th Jan 18
Optimum Entry Point for Gold and Silver Stocks - 12th Jan 18
Stock Selloffs Great for Gold - 12th Jan 18
These 3 Facts Show Gold Is Set to Surge in 2018 - 12th Jan 18
How China is Locking Up Critical Resources in the US’s Own Backyard - 12th Jan 18
Stock futures are struggling. May reverse Today - 12th Jan 18
Three Surprising Places You See Cryptocurrency - 12th Jan 18
Semi Seconductor Stocks Canary Still Chirping, But He’s Gonna Croak in 2018 - 12th Jan 18
Land Rover Discovery Sport Panoramic Sunroof Questions Answered - 12th Jan 18
Information About Trading With Alpari And Its Advantages - 12th Jan 18
Stock Market Investing 2018 - “I Hope I’m Making a Bad Buy” - 11th Jan 18
S&P 500 Fluctuates As Stock Market May Be Topping, Or Not? - 11th Jan 18
SPECTRE Microprocessor Security Flaw - Big Brother = You - 11th Jan 18
7 Market Forecasts 2018 from the Brightest Financial Minds I Know - 11th Jan 18
It’s Not Enough to Be Contrarian - 11th Jan 18
Stocks That Take One for A Roller Coaster Ride Through the Thick And Thin Of Every Single Investment Made - 11th Jan 18
Police Arrest Tree Protester on Meersbrook Park Road, Sheffield - 10th Jan 18
Stock Market Aggressive Sell Signals - 10th Jan 18
The 2018 Decline in Precious Metals - 10th Jan 18
Gold Hits All-Time Highs Priced In Emerging Market Currencies - 10th Jan 18
TMV : 3X Leveraged Short on US Treasury Bonds - 10th Jan 18
Here are the Key Levels in Gold & Gold Miners - 10th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

Frustrated Safe Haven Swiss Franc Investors May Soon Turn to Gold and Silver

Commodities / Gold and Silver 2012 Apr 14, 2012 - 08:18 AM GMT

By: Dr_Jeff_Lewis

Commodities

The resurgence of concerns over the long term solvency of debt laden Eurozone countries like Greece, Spain, Portugal, Italy and Ireland has led to refreshed selling of the Euro against the other major currencies since early April. 

Although the market in EUR/USD now seems to have stabilized just over the psychological 1.3000 level, deep questions remain among international investors as to whether the European Central Bank or ECB will be able to manage the ongoing European debt crisis over the coming few years without the trade bloc disintegrating or the common currency being further devalued by the forex market.


Furthermore, investors worried over the ECB’s recent notable balance sheet expansion, which has reportedly grown by roughly 30 percent since current ECB President Mario Draghi took over last November, have returned to buying the Swiss Franc as a relative safe haven for their investment funds.

Swiss Franc No Longer Convertible Into Gold

Nevertheless, two key factors have substantially diminished the Swiss Franc’s historic status as a safe haven currency with relatively low inflation. The first and primary factor is that the Swiss Franc is no longer convertible into gold, having been the last major paper currency to leave the Gold Standard after a referendum on the issue took effect on May 1st of 2000.

Switzerland’s 40 percent gold reserve requirement was also suspended at that time, and the country’s gold reserves subsequently fell sharply to only 20 percent by 2005. Switzerland had adopted the Gold Standard in the late 1870’s until convertibility was suspended in 1914. Its currency was then devalued before returning to the standard in the 1920’s.

SNB Deliberately Weakens Swiss Franc by Forex Market Intervention

The second factor is that Swiss National Bank officials shocked the forex market when they indicated that they intend to defend the 1.2000 level in EUR/CHF against all speculative attacks, with an “unlimited” supply of currency. This new policy was announced when the cross had been recovering after having dipped as low as the 1.0063 level last August.

To perform this herculean feat of central bank manipulation, which sent EUR/CHF rocketing almost eight big figures higher in one single dramatic day last September, it seems the SNB will be just printing more money, thereby diluting the value of their currency even further.

This well publicized currency market intervention had a similar effect on the Swiss Franc as the highly problematic quantitative easing policies employed other central banks, like the Federal Reserve, the Bank of England, the ECB and the Bank of Japan, which have consistently weakened their respective currencies at the expense of hard currencies like the precious metals.

Metals Look Better as Market Retests SNB’s 1.2000 Intervention Point in EUR/CHF

Since the beginning of April, the forex market has tested the Swiss National Bank’s resolve to defend the 1.2000 level in EUR/CHF on two separate occasions, with the market falling as far as 1.2034 on April 5th and then falling below the intervention level to hit a low of 1.1997 on April 6th.

Although the EUR/CHF market has subsequently recovered slightly to trade as high as 1.2032 by April 11th, it has remained at low levels, indicating that investors are still willing to dump their Euros for the ever less valuable Swiss Francs being printed by the SNB.

Egon von Greyerz, the founder and managing partner of Switzerland’s Matterhorn Asset Management, was recently quoted by King World News as saying that, “The problem is that Switzerland is expanding its balance sheet like every other central bank.”

Furthermore, his view was that precious metals are probably in the process of finding a medium term bottom, saying that, “Very soon, these investors will realize that the only protection is to buy gold.” 

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2012 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules