Wednesday, September 7, 2011

What the Swiss Franc move means for Gold

The Swiss Franc(CHF) was perceived as a safe haven currency. Yesterday, the Swiss National Bank (SNB) intervened in a dramatic way to weaken the Franc, which has been rallying like crazy due to European investors searching out a safe-haven.
The Franc had rallied to a parity of 1 against the Euro. Such rapid expansion of currentcy was hurting Swiss business. Finally the SNB said that it will maintain the swiss franc at 1.2 against the Euro, no matter how much resources it has to give. This was a devaluation of 20% from the parity which the Franc had touched.
Now, a weakened Franc is no longer a safe-haven. CHF‟s appeal as a safe haven is diminishing given the SNB‟s attempts to weaken the currency. Hence, we could see a situation where gold strengthens and CHF weakens going forward.
This increases the safe-haven appeal of gold, which has a finite supply.

2 comments:

sudhin said...

HIndalco is testing the 50 dma, hdfc bank has closed >50 dma.

sudhin said...

Mr. Sudarshan could you please explain how we are to fix the high and lows for calculating the fiboancci levels, for example in ril we have a low in place but how do we fix the high, as we have around 4-5 swing highs up to Jan 6th, if you could put up a chart it would be of great help.
Thanking you,
Sudhin