Financial Advisor

Gold last man standing after CHF peg

Today the Swiss National Bank made good on persistent market rumours that it was planning to peg the SFr to the Euro in order to halt the dramatic appreciation of the currency which has been hurting the Swiss economy.
The announcement of a minimum EURCHF level at 1.200 nevertheless took the market by surprise coming after a couple of days where the SFr has been strengthening again towards 1.10 Euro.
With one more “safe haven” now literally removed investors will look to gold as the last man standing which also means that a kneejerk reaction down to 1,862 following the announcement quickly attracted buyers who took it back up to 1,915.
Whether this will accelerate the appreciation of Gold, which currently is heading for its best year since 1979, remains to be seen. Investor interest has been falling over the last month despite new highs being reached with total gold holdings in long futures bets and exchange traded funds having dropped by 251 metric tonnes to 2,865 tonnes.


Worries about further margin increases on gold futures, which could force hedge funds to reduce exposure even further, combined with sellers who need to off-set losses on other investments could play its part although the fundamental reasons behind the month-long rally remain.
Gold has the potential to reach 1,970 over the coming months but after the recent 200+ correction short-term traders will be more inclined to book profits faster than before. This might slow down the ongoing rally but it won't stop it.

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