• Switzerland's news in English

Gold's status boosted as Swiss weaken franc

AFP · 7 Sep 2011, 17:32

Published: 07 Sep 2011 17:32 GMT+02:00

Facebook Twitter Google+ reddit

Gold's status as a safe haven in times of economic turmoil is set to strengthen, pushing the precious metal to fresh record highs, after Switzerland weakened its currency, analysts said on Wednesday.

The Swiss National Bank shocked markets on Tuesday by placing a floor on the euro's value against a surging Swiss franc, which like gold is seen as a traditional safe bet among investors.  

"This surprise move from the SNB is gold beneficial in the long run," said Andrey Kryuchenkov, a commodities analyst at Russian financial group VTB Capital.  

"And, assuming that risk aversion escalates from here, bullion is still your investor darling."  

The SNB set a minimum exchange rate of 1.20 francs per euro, saying the current value of the Swiss currency was a threat to the economy.  

The Swiss franc has risen strongly in response to the eurozone debt crisis, hitting Swiss exporters and the tourism industry hard.  

Gold meanwhile has set a series of record highs over the past few months, most recently on Tuesday when it reached an all-time peak of $1,921.15 an ounce.  

"Longer-term, this SNB decision should strengthen gold's claim as a safe-haven asset and will likely be much in demand for wealth preservation," said Credit Agricole analyst Robin Bhar. Gold is also a good hedge against inflation.  

Analysts at Standard Chartered said investors may seek out other safe-haven alternatives as a result of the Swiss action.  

"In Europe, the Scandinavian currencies such as the Norwegian krone and Swedish krona may see further appreciation pressure ... The Japanese yen may also see its traditional safe-haven role enhanced by the Swiss move," they wrote in a note to clients.  

Despite gold's attraction, pension funds tend to invest only 2.0-5.0 percent of their assets in the precious metal, preferring more liquid safe-havens such as US government bonds, said Anne-Laure Tremblay, an analyst at BNP Paribas.  

She told AFP that US Treasuries were far easier to convert into cash because they formed part of much bigger market than gold.  

Story continues below…

Tremblay added that gold's surge was not a bubble about to burst.  

"Current fundamentals for gold -- tight supplies and strong demand -- coupled with the macro-economic and financial environment justifies the hike in prices," she said.  

Industry body the World Gold Council recently predicted that the metal used for jewellery and in dentistry would experience sustained demand from key markets India and China this year despite its high price.

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
'Protect Swiss waterways or lose our fish': WWF
Photo: Richi Stadelmann/WWF

Eighty-five percent of fish species in Switzerland are under threat, according to a report by the World Wildlife Fund (WWF).

SBB pilots new annual pass – costing 12,200 francs
The 'door-to-door' pass includes use of an electric car. Photo: SBB

Swiss federal railways (SBB) is looking for 100 people willing to pilot a new annual transport pass that includes use of an electric car.

Immigration to Switzerland falls as emigration rises
File photo: The Local

Immigration in Switzerland has fallen considerably this year, according to official figures.

Wawrinka aces his way into Basel quarterfinals
Photo: Fabrice Coffrini/AFP

The home favourite returns to the quarterfinals of the Swiss Indoors for the first time in five years.

Illegal immigrant dies after setting himself on fire
The victim was treated at University Hospital Zurich. Photo: University Hospital Zurich

The 45-year-old Tunisian was threatened with deportation.

Swiss government rejects call for second immigration vote
Photo: Justus Blumer/Christophe G

The Swiss government has rejected a popular initiative calling for a revote on plans to limit immigration.

Bern: companies should report salary inequality by law
File photo: Fabrice Coffrini/AFP

The Swiss government wants to force small companies to examine their rates of pay every four years.

Husband in custody after Orbe body identified
File photo: Bas Leenders

The deceased is a 55-year-old woman who lived in the house with her husband.

Presented by MoneyPark
How to get a mortgage in Switzerland
Houses in Zürich. Photo: Pixabay.

Ready to buy? Here’s what you need to know as an expat about Swiss regulations, how to finance your purchase, and why you should use a broker.

Autumn in Switzerland: ten stunning Instagram photos
Photo: Swiss Tourism/Jan Geerk

Switzerland is beautiful in all seasons, but as these photos show, autumn is a special time in the alpine country.

Photo: Unterirdisch Ueberleben
Inside Switzerland’s largest nuclear bunker – 40 years on
Sponsored Article
Last chance to vote absentee in the US elections
Photo: The Local
Ticino firefighters rescue cow from swimming pool
Photo: Antoni Da Campo
Vegan wins battle to be accepted by Swiss army
Photo: Swiss Tourism
Ten Swiss ski resorts named most expensive in Europe
Photo: Randy Kashka
Swiss women will ‘work for free’ for the rest of year
Photo: Swiss Tourism
Montreux throws hat in Olympic rings
Photo: Swiss Tourism
Seven things you’ll miss about Switzerland if you leave
Photo: Richard Juilliard/AFP
Man makes Geneva airport bomb threat ‘for a joke’
Photo: AFP
Solar Impulse team reveals plans for unmanned plane
File photo: Martin Abegglen
Swiss to vote on passport rules for 3rd gen foreigners
Photo: AFP
Swiss wingsuit hotspot Lauterbrunnen won’t impose ban
Photo: Swiss Tourism
Six reasons Switzerland isn’t as boring as you might think
Photo: Swiss Tourism
Report: Switzerland one of world’s best places for girls
Photo: The Local
Thief returns Swiss cow bells worth thousands
File photo: Wikimedia Commons
One in three rapists isn’t locked up: statistics
Photo: activistin.ch
Tampon-tax protest turns Zurich fountains red
Photo: AFP
Geneva police to lift ban on bearded officers
Photo: Marcel Gillieron/AFP
Suicide chef’s restaurant keeps Michelin stars
Photo: Lara de Salis
11 things the Swiss get tired of hearing abroad
Photo:  Ivo Scholz/Swiss-image.ch
Survey: expats in Switzerland have money but few friends
Photo: AFP
Swiss press criticize Bern’s 'capitulation' on immigration
Photo: Jura Trois Lacs tourism
German ex-policeman is Swiss city’s new hermit
Photo: Dmitry A. Mottl
Ticino votes to favour local workers over foreigners
jobs available