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Gold and the Swissie

Bruce Krasting's picture




 

Lots of things tugging on the price of gold today. For me, the most important factor was the threat of another devaluation of the Swiss Franc. The headlines from the Swiss papers:

 

.

.

 

The last time we had headlines like this the EURCHF was 1.05. Not long after it was 1.21. So it’s not surprising that this time around folks ran for the hills in fear. The CHF lost 2.3% against the Euro today on just the SNB threat of “pegging up”.

Anyone who was still hanging onto the notion that the CHF was a safe haven, puked with the headlines. So more money went to gold.

If we actually do get a re-peg it would add even more fuel onto the gold price. I think we will be looking 1,900 in the rear view mirror if the SNB ups the anti.

Hildebrand has balls to leak this story over the weekend. His timing looks like a deliberate insult to the G20. The final communiqué had this to say:

 

We affirm our commitment to refrain from competitive devaluation of currencies.

Of course Switzerland in not in the G20 so they can ignore this altogether. They can do as they please. However, this time there might be a bit of outrage from their neighbors north, south, east and west.

I’m not sure who fired the first missile in the developing global currency war. Switzerland has already thrown up its fair share. They’re going to get hit back if they launch another.

We are (again) at zero visibility on the Franc. Better to “stay away” from this one. The flip side is that the gold story gets stronger and stronger. Look for a second tier (but cash rich) Central Bank to make an announcement of a big gold buy. After all, where else would a CB put cash these days?

.

 

 

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Tue, 11/08/2011 - 18:26 | 1858536 SILVERGEDDON
SILVERGEDDON's picture

Better yet  - Zero Hedge - because Knowledge is Power

Tue, 11/08/2011 - 09:12 | 1855981 PulauHantu29
PulauHantu29's picture

Why are all the wealthy Greeks and italians driving up to Switzerland and buying gold bars?

You can't eat the stuff.

Tue, 11/08/2011 - 04:59 | 1855767 fredquimby
fredquimby's picture

This may be the "end game" plans: bankrupt the sovereigns and make them dishoard their Gold holdings BEFORE any revaluation.

Interesting thought.

Tue, 11/08/2011 - 03:09 | 1855704 Temporalist
Temporalist's picture

Some links about Gold. 

 

First the biggest news:

China’s gold imports jump sixfold  - from the Financial Times (do a web search for the article title if you lack a subscription)

http://tiny.cc/e9g9d

OR try these links   http://tiny.cc/gxdoq    http://www.cnbc.com/id/45198734

Gold tops $1,790 to end at over six-week high

“Gold is money and now that we’ve heard that the German economy minister concurs that gold can’t be touched, that theory is reinforced,” said Mark Leibovit, chief market strategist at VRTrader.com.

“Maybe [we’ll] get a pullback into December, but the trend [for gold] is up and I’m looking for new highs,” he said.

http://www.marketwatch.com/story/gold-futures-climb-to-top-1780-an-ounce...

 

Tue, 11/08/2011 - 02:59 | 1855698 chindit13
chindit13's picture

There might be some big issues at play here.  The Swiss have a reputation for financial conservatism that is not exactly backed up by the facts.  Yes, Swiss bank directors are personally liable for losses---unlike US TBTFs---but that does not mean the Swiss are incapable of error.  After all, they did sell about half their gold in the period of 2001-2005.  On top of that, the major banks lent heavily---in SFrs---to Eastern European home buyers.

Just UBS and CS represent half an Iceland in terms of assets to GDP.  That means 5x Swiss GDP.  Both are also much more highly levered than US banks (>30:1).  One has to consider what a 5% decline in value of assets would do to them, and in turn the Swiss budget.  The pool of Director assets just isn’t that deep.

It may well be that 1.2 isn’t good enough to make foreign default on SFr loans less likely, and the SNB et al have decided that the loss of safe haven status plus the possibility of imported inflation is the lesser evil.  I do not know the banks’ portfolios well enough to say how exposed they are to both foreign SFr borrowers and European sovereign debt, but it does seem that this---plus export competitiveness---is the driving force behind the pegging talk.

Tue, 11/08/2011 - 03:28 | 1855706 Max Fischer
Max Fischer's picture

 

 

Did you know that only ~25% of Swiss are homeowners, compared to ~67% of Americans?

Swiss banks may be highly leveraged, but their population certainly doesn't have the "ownership" entitlement that is so prevalent in the US. It's sort of funny how Americans have been conditioned to be debt slaves and tricked into believing that it's the "American Dream" instead.  If you buy a 200K house and mortgage it at 4% for 30 years, you pay over $400,000 for your "dream".  How the hell did the banks convince an entire population that this was the "American Dream"?  I think I'd rather rent, save all the interest and buy gold with it, rather than hand it over to a bank over a lifetime of labor. 

http://www.presidency.ucsb.edu/ws/index.php?pid=64935#axzz1d60qhMB7

LOL

Max Fischer, Civis Mundi

Tue, 11/08/2011 - 04:57 | 1855765 Tapeworm
Tapeworm's picture

I was able to "buy" a house and then pay off the mortgage from my holdings in Harmony Gold, at that time HGMCY.

 Bernard Swanepoel was able to jack the earnings of HGMCY to get the stockholders a fine special dividend plus the price apprecition of the shares.

 My wife is an idiot for not realizing just how important it was for her to be debt free on her nest. The last secured creditor is the local gombit that now has to get back to 1998 spending levels in order to keep out of chapter eleven. The governments still jack the taxes as if there was no collapse of their ponzi tricked rise in unison against the taxcow  "homeowner". That does not even have the slightest accounting for the vast added heap of debt upon slobs like myself and others that actually closed out their  naked debt

 Bring on the "Fees" to keep the rotting gombit scams of goomint above all else:

 The continuing punishment for the savers that actually had to produce a surplus of manufactures in order to have savings is completely negated by a slime in a TBTF getting fungible dollars that had no provenance other than a keyboard.

 As some have claimed, the Occupy movement is the last hope for those that are not being co-opted by whatever crap that comes from the fraud that is Basel II.

 Mark it to market, and let us just get it over.

Tue, 11/08/2011 - 02:37 | 1855677 Printfaster
Printfaster's picture

Central banks cannot create liquidity, they can only destroy liquidity

By printing money, they take the value of money in the economy and destroy.  Overall this destroys economic liquidity.  The junk that they print has no value and no one wants it.  That is what happened to the BOJ the other day when they wanted to tank the buck by buying it.  In order to buy dollars, they had to sell gold, no one in their right mind would want to take yen in return for bucks when the BOJ was printing yen like madmen.  The BOJ had to stop printing before anyone would take yen.

 

 

Tue, 11/08/2011 - 01:56 | 1855658 barliman
barliman's picture

 

Bruce,

What lasting harm occurs to Switzerland from changing the role of the CHF from being the "safe haven" bitch to Bernanke's USD devaluation dominance into the "street walking" fiat whore that pegs the price of her services against the euro?

The Swiss are renowned for their .... watches ....... chocolate (I prefer Belgian chocolate myself) ..... and .... oh,yeah - their anonymous banking tradition.  Obama's heavy handed determination to destroy the anonymous part of their banking approach is in line with all of his other "the Chicago way" tactics.  The problem is the Swiss have been doing anonymous banking longer than any of the "Chicago" tactics have been around. The only downside for them is that they will have to take CHF pain until the global system breaks (my money is hedged but personnaly I think it doesn't make it to the New Year) or Obama is out of office (which doesn't necessarily mean he runs for re-election - the down ticket destruction he can cause by being the Democratic Presidential candidate would be of epic proportions).

On the upside for the Swiss, they know what they are holding and for whom they are holding it. Their leverage is enormous. Or do you believe they REALLY don't know the contents of their vaults?

barliman

Tue, 11/08/2011 - 01:15 | 1855622 oldman
oldman's picture

Hey Bruce,

I like your idea of a 1.30. The swissie will lead gold to new highs!

I don't know a thing about these markets, but this is my first thought and gold in any currency appears to need very little impetus to send gold screaming to new highs in each.

I'd rather have it more orderly, but I'm just not that powerful---the universe has its own plan; of this I am certain       om

                 BTW----I'm a little giddy from traveling for 24 hours without sleep, so please forgive this exhuberance

Mon, 11/07/2011 - 23:36 | 1855461 static
static's picture

some thoughts on Gold and the Miners:

http://www.acting-man.com/?p=11446#more-11446

From Pater Tenebrarum's Excellent Blog

static

Mon, 11/07/2011 - 23:03 | 1855386 chump666
chump666's picture

and oil.

And the Swiss love a high oil price.

Mon, 11/07/2011 - 22:25 | 1855329 myne
myne's picture

I wish Europe would hurry up and have another liquidity crunch again so the AUD hits the deck again.

I figure if we hit 70c vs the USD again sometime soon, I'll bail out of my potentially fatal ETF and get some physical in the next upswing.

Mon, 11/07/2011 - 23:04 | 1855393 chump666
chump666's picture

don't know about a 70, but it looks topped out and tight, same with stock indexes. 

Mon, 11/07/2011 - 22:08 | 1855311 PulauHantu29
PulauHantu29's picture

Central Banks (Nations) are gobbling up all the gold they can get looks like.

Don't they know what Buffet said.,...."you can't eat gold."

Why don't the CBs buy Berkshire's HatWay instead, I wonder?

Mon, 11/07/2011 - 22:32 | 1855337 HoofHearted
HoofHearted's picture

SMART central banks are gobbling up gold. "All your gold are belong to us." If you get my drift...

Mon, 11/07/2011 - 21:15 | 1855244 Bicycle Repairman
Bicycle Repairman's picture

"Anyone who was still hanging onto the notion that the CHF was a safe haven, puked with the headlines."

What will it take to wise people up?  CHF isn't backed by anything but bad intentions.

Mon, 11/07/2011 - 22:27 | 1855332 disabledvet
disabledvet's picture

I'm not sure i would go this far. This is not Singapore here. This is Rousseau's "heartland of freedom." The only comparison i can think of in the Western World is New Hampshire...and well, they have neither the independence nor temerity to indeed thumb their nose at the G-20. I agree this does not seem like expressing some form of conscience however. They seem to sending a message to the "euro-denominated" people: stick with us, you'll be better off in the long run. It's a strikingly bold claim.

Tue, 11/08/2011 - 08:29 | 1855913 Overflow-admin
Overflow-admin's picture

From where I stand, in the center of the wasp's nest, I can assure you that Rousseau turns in his grave.

 

No competeeeeeteeeeeve devaluation says Hildenbrand <- ass

Mon, 11/07/2011 - 20:38 | 1855188 Georgesblog
Georgesblog's picture

Stories like these are the reason that I wrote "The Four Money Questions". Given a choice between real money and paper, the target is always real money.

http://georgesblogforum.wordpress.com/2011/09/16/the-four-money-question...

Mon, 11/07/2011 - 20:40 | 1855186 Conax
Conax's picture

edit: oops - @ Walkure

Why would CBs trade an appreciating asset for a depreciating one (paper) when all they have to do is create an ETF that everyone jumps into with both feet? Buy a share of our real physical gold, we'll store it for you!

Since the end game is to gather all the gold and silver for themselves, along with real estate and businesses, selling it outright would be foolish. Gordon Brown learned this the hard way.

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/751158...

Mon, 11/07/2011 - 21:31 | 1855264 walküre
walküre's picture

Exactly! Their ETF game gives the investor an illusion to be part of the "greatest game in town"!

But there's no investor appetite unless the price keeps going up. We've seen a fast run followed by a shakedown. Now we'll see another run before the big shakeout.

Just understand the premise that THEY want it all and THEY have absolutely no interest in making YOU rich. That was my initial point about the manipulative and speculative aspect of this game. See what happened to oil in '08. Few understood the game and shorted oil at North of $100 all the way down to $30ish per barrel. This is THEIR game and when all THEIR media is full of gold stories and the importance of gold in this futile economy, then I'm beginning to wonder how THEY will benefit from this when investors are piling into "the greatest game in town".

Physical is another story. Who is buying and who is selling and WHO is making the biggest spread?

Mon, 11/07/2011 - 20:36 | 1855183 devo
devo's picture

Interesting, I was looking at the Swiss Franc on Friday. Even made a call to my bank asking if they had any. Might have to hold off on that one for now.

I'm wondering if I have the stomach to buy more gold. Purchased on that last pull back around 1630, and I'm not a big fan of dollar cost averaging upward. Might have to stay in dollars for now and hope something drops to a level I'm comfortable buying.

Mon, 11/07/2011 - 21:01 | 1855225 SHEEPFUKKER
SHEEPFUKKER's picture

The bro to ho ratio is 50:1.  Buy a few ho's bro.

Mon, 11/07/2011 - 20:17 | 1855124 Mercury
Mercury's picture

Look for a second tier (but cash rich) Central Bank to make an announcement of a big gold buy.

As I've bitched before in these pages, I don't see why this wasn't the best move for the Swiss too - instead of doing what they did. If they're worried about their currency

appreciating  too much (choking their exporters and money lenders) why couldn't they print and buy gold?

When the music finally stops, being a citizen of a fortress country with a lot of gold (which the SNB could dividend out if need be) is a pretty good relative situation to be in. 

But for some reason the Swiss seem to be following the herd over the cliff here.

Tue, 11/08/2011 - 05:50 | 1855789 prole
prole's picture

Maybe somebody in Switzerland woke up with K-Daf's head at the foot of their bunk bed. Maybe the Swiss are overcome with guilt for being the one percent? (of countries that aren weren't stupid)

Mon, 11/07/2011 - 19:58 | 1855111 SHEEPFUKKER
SHEEPFUKKER's picture

Dumb phucks.  The Swissy will go the way of the rest of the Euro trash and all other paper trash for that matter. Why not just let the mutha ucka appreciate, buy up all the gold, and be done with it.

Mon, 11/07/2011 - 19:40 | 1855082 rlouis
rlouis's picture

The question I have - and for those at ZH that have followed the writings of Another, FOA and FOFOA might have also is: what impact does the German statement that they will not pledge gold against the EFSF.  Another asserted that gold assets backing the Euro it a much stronger currency than the dollar.  Based on the recent Euro area problems I'm not sure his argument holds up at all, or perhaps it's fractional gold. 

Mon, 11/07/2011 - 22:45 | 1855359 DonutBoy
DonutBoy's picture

Backing up the EFSF and backing up the Euro are two different things.  To paraphrase Jim Rickards, the bonds are toast (including EFSF bonds), the banks are toast, but that does not mean the Euro is toast. 

The decision on the Euro is still to come.  Italy is too large for the EFSF.  If the ECB prints to buy Italian sovereign debt, then the Euro is circling the drain.  If instead some banks and governments are forced into default, the Euro could survive.  We're closing in on that decision.  The ECB rate was lowered and someone is buying Italian bonds to keep a ceiling on the yield.   If Germany let's that go on, then I think the Euro will follow the banks and the bonds.

 

Mon, 11/07/2011 - 19:50 | 1855096 CrazyCooter
CrazyCooter's picture

Gold will be money after the current system is more or less burned down to the ground. This can be orderly or disorderly. Increasingly, it is looking like disorderly.

To try to back stop this truly staggering mountain of leveraged paper with gold would be sheer stupidity. Not saying it can't happen, but it really doesn't make sense. For any nation with a lot of gold, it makes sense to go back to traditional fiat with fractional gold backing. Both Germany and Italy own lots of physical gold, so if Italy walked from the Euro, they could just carry on with life after a 100% default.

Greece doesn't have the gold option, so they would have to issue fiat backed by their, ahem, productive economy.

Remember, everyone wants the cheapest money right now to support their exports (and economy). Kind of zero sum, which is why folks toss around the term "currency war".

Gold would make for a strong currency, something no one wants right now anyway.

Regards,

Cooter

Tue, 11/08/2011 - 08:25 | 1855907 Overflow-admin
Overflow-admin's picture

Gold could be money... but we could also have a system without money, i.e. an economic system, not a commercial.

Mon, 11/07/2011 - 20:18 | 1855151 cynicalskeptic
cynicalskeptic's picture

Odds are you'll have a lead backed (copper jacketed) standard in the intervening period.  Things are looking VERY messy....think Yugoslavia collapse recdux.     At least Europe was smart enough to keep their farmers in business.  Things could get real messy for countries dependent on importeed food - or transport over long distances.

Tue, 11/08/2011 - 01:45 | 1855645 Big Slick
Big Slick's picture

Size of the market: 7.62 x 39

Tue, 11/08/2011 - 01:46 | 1855648 Big Slick
Big Slick's picture

(if you don't know what that means, Google it)

Mon, 11/07/2011 - 19:48 | 1855091 bernorange
bernorange's picture

Gold is the currency of central banks.  The speculation about gold being leased, sold, rinse repeat ad nasuem just lends credence to the idea that we will eventually see a nasty world war when the game of musical chairs ends and countries find that "their" gold is also everyone elses gold.  Only the few who bothered to repatriate and take physical possession of their gold are going to come out ahead.

www.pmbug.com

Mon, 11/07/2011 - 19:54 | 1855103 CrazyCooter
CrazyCooter's picture

I am not sure of the breakdown, but US banks have approximately 4 tons of "private" gold, which is gold held by banks for themselves or on behalf of other countries. If this number is inaccurate or someone has a break down, I would love to see the link/resource. I am just talking from something I read somewhere but can not source at this time.

Recall that recently Mr Chavez requested that his gold, being held in the US or the UK I believe, be physically sent to Venezuela.

The paper claims are likely 100:1 or more, so when the paper system burns down, the gold goes no where and in all likely hood the original owner (in the case of nations) will retain ownership. If this doesn't happen, I think the prediction of conflict is a pretty good one.

They are damn fools for letting anyone else hold it anyway ...

Regards,

Cooter

Mon, 11/07/2011 - 19:34 | 1855069 SILVERGEDDON
SILVERGEDDON's picture

"It only takes five bucks to dig it up out of the ground" Robotrader is manipulating the worlds stock markets with this remark. Now, everyone is buying. Unlike tulips though, gold is currency, and never deteriorates. "It has a power like no other" 

Tue, 11/08/2011 - 06:49 | 1855823 Overflow-admin
Overflow-admin's picture

Currency is a product of market economy, not Economy. It has no more power than another. Please think supply/demand and fuck the monetary system. http://www.youtube.com/watch?v=4Z9WVZddH9w

Tue, 11/08/2011 - 07:02 | 1855830 Ghordius
Ghordius's picture

Money is a product of market economy

Currency is a product of the banking/(government taxing) system

Mon, 11/07/2011 - 19:55 | 1855106 CrazyCooter
CrazyCooter's picture

Robo just pitches stocks ... I think you are quoting MathMan ... but I could be wrong.

Regards,

Cooter

Mon, 11/07/2011 - 20:53 | 1855210 knukles
knukles's picture

Who the fuck cares!  At $5/oz, it's cheaper than most cash crops, bottled water, condoms (regular or cherry flavored) bags of rocks, ice cream, locks of Jesus' hair, slag, tallow renderings (maybe not, but getting sketchy) steak, Fleet enemas (voted best in customer satisfaction 3 years running) gasoline, a Le Big Mack avec sauce Especialle or whatever the fucking frogs call it, and tubes of used Titelist rangeballs.

Now that's what I'd call a great investment opportunity......

Mon, 11/07/2011 - 19:14 | 1855028 walküre
walküre's picture

Can we all agree that the paper price of gold is manipulated by speculation?

I read an awful lot about gold today across the world financial news. Spurred by the European approach to suck gold from Germany's Bundesbank and capitalize the rest of Europe.

There is an awful lot of gold stored around the world, supposedly in the hands of central banks. When the bills come due, that gold will hit the market in one form or another.

This may be the beginning of a gold bubble and I'm neither buying bullion nor miners at this juncture.

When central banks are scrambling for liquidity, cash is king.

Mon, 11/07/2011 - 19:26 | 1855053 DonutBoy
DonutBoy's picture

Non sequitur.
Your facts are uncoordinated.

Central Banks do not "scramble for liquidity",  Central Banks create liquidity at the touch of a keyboard.


Mon, 11/07/2011 - 19:39 | 1855081 walküre
walküre's picture

Not true. Central banks are at the mercy of politics. Believe it or not. That works both ways, by the way.

Right now we are seeing a problem in the system brought to you courtesy of political will to keep inflation in check.

Austerity is the arch enemy of Helicopter Ben.

Tue, 11/08/2011 - 06:47 | 1855821 Overflow-admin
Overflow-admin's picture

You don't get it. You, society in the whole, create liquidity. Whatever if you buy or sell, if you do it for/with fiat money, you create liquidity. Hence it's depression that crashs liquidity. But where comes the depression from? Just look at the pyramidal system we have. Inequalities create anger, frustration, depression; inequalities are the big one problem.

In the conceptual way, the mathematical way. The scientific method assessing how systems work.

Food for tought: http://www.youtube.com/watch?v=4Z9WVZddH9w

Mon, 11/07/2011 - 21:00 | 1855224 Bay of Pigs
Bay of Pigs's picture

There has been no austerity in the USA. That's just absurd.

Mon, 11/07/2011 - 21:20 | 1855250 walküre
walküre's picture

Not yet. But after PIIGS, the road to austerity for US is paved. Which is why there's no further easing and everything is stalling.

Tue, 11/08/2011 - 03:33 | 1855717 Cast Iron Skillet
Cast Iron Skillet's picture

wishful thinking.

Mon, 11/07/2011 - 19:26 | 1855051 New American Re...
New American Revolution's picture

It's manipulated some of the time, but it doesn't last, eventually market forces take over.   As far as a bubble, I think the bubble is in currencies and their race to the bottom.   Looking at these charts I just don't see a bubble in gold, at least not yet and I don't think so for awhile.   The worm is turning bullishly large and in charge right now, but your welcome to sell into it.  In fact I see $2000 gold by Thanksgiving, consolidation and then breaking out of its new up channel to $2500 sometime in the 1qtr 2012.   This thing has got a honeymoon hard-on that I don't think is going to quit until the Euro dies the death of a million cuts.  Quick and painless.

Mon, 11/07/2011 - 19:55 | 1855088 walküre
walküre's picture

Ok, is the market for gold purchases going to collapse when central banks are starting to liquidate massive amounts of physical? Yes or no?

Was reading about the Fed running out of cash or some analysis to that extent here on zh this morning. Then I'm reading about gold, gold and more gold across the newswire.

The elite controls the news. They control the gold. Are they now the benevolent gang that wants everyone to get a piece of the action and be a happy gold camper OR is this a concerted effort to shore up buying interest in the investor population at a time when cash is scarce?

Being "in cash" means to have "cash" bills in the house or anywhere else "private" and non-accessible by others.

There is not enough cash to satisfy the going demand. They're not printing more. You do the math.

=====

Another thought... in 2008 just before the great crash, what was the most hyped up commodity and does anyone remember (I know it's a long time) what trade was among the best during that crash?

Oil of course. "Peak Oil" theory going gangbusters across the net. People piling in at the top and reaching for the stars.

Limit for price of oil wasn't the sky but $147 a barrel. That's when the ship came crashing down. Nobody seriously ever questionned why oil was going to that price in the first place. There was no reason for it other than classic manipulation and speculation.

There are theories for gold to be at $500 or $5000 today. I'm sure it will run a bit longer but when it corrects when Depression hits hard, the gold short could be a super play. Talking paper of course.

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