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Greetings!,
Last night gold traded to a new record high of $1921 per ounce. This new price would be short-lived as gold immediately declined following a statement made by the Central Bank of Switzerland.
According to Bloomberg ...
Gold fell from a record as some investors sold metal to cover losses in the Swiss franc after the country's central bank imposed a ceiling to the exchange rate.
The franc tumbled after the bank set a minimum exchange rate of 1.20 per euro and said it will defend the target with the "utmost determination" if needed. Ministers from Germany, Finland and the Netherlands meet today to discuss a Finnish demand for collateral in a bailout for Greece, while the Italian Senate will debate an austerity plan amid a strike.
"Those long the Swiss franc are likely long gold, so both positions are cut at the same time," Sebastien Galy, senior currency strategist at Societe Generale SA, said today in an e- mail. The move by the Swiss bank "suggests that we will go 'risk on' now, which is not good for gold."
It is my belief that once the dust settles, traders will perceive this move to peg the Swiss franc to the euro dollar as extremely bullish towards the precious metals especially gold. As a safe haven currency, the Swiss franc once fully pegged to the Euro dollar will lose some of its luster.
Wishing you as always good trading,
Gary S. Wagner
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