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What Are The Implications Of A Negative Swiss Deposit Rate For Gold?
In what could be described as a rather stunning move, the Swiss National Bank (SNB) has decided to cut the interest rate on sight deposits at the SNB into negative territory. This move was necessary to defend the currency against renewed speculative positions which pushed the EUR/CHF exchange rate down again, thus increasing the pressure on the Swiss economy. As the volatility on the financial markets moved up, market participants were once again running towards the Swiss Franc as it’s still considered to be one of the few ‘safe haven’ currencies out there.
The president of the SNB is also pointing a finger to the Russian Ruble crisis as the flight of capital and liquidity from that country is moving towards either the former USSR-member states or Switzerland. The total amount of the capital flight out of Russia this year will very likely top $150B and as you can imagine, even if only 10-15% of that amount would have been used to purchase Swiss Francs, the influence on the exchange rates of the CHF will be enormous. And indeed, in the past few weeks there definitely was some upward pressure on the CHF which resulted in the central bank having difficulties to defend the proposed EUR/CHF exchange rate of 1.20.
With this move to put the interest rate for sight deposits below zero, the SNB once again shows its determination to defend the exchange rate using every strategy in the playbook. The negative interest rate should act as a deterrent for people considering to purchase Swiss Francs as a safe haven investment as it makes the currency less appealing. This will obviously have huge implications for the CHF, the US Dollar and gold.
SNB President Jordan. Source
The main question which need to be answered (but cannot be answered) is how effective this deterrent is. Will a negative sight deposit ratio of -0.25% be sufficient to scare off investors looking for a safe haven? Maybe. But let’s assume it does work, and investors are looking for different safe havens than the Swiss Franc.
The first currency coming to mind is obviously the US Dollar. The economy is booming again (despite some dubious numbers and the current crash of the energy-related sectors), and the Federal Reserve will very likely increase the benchmark interest rate in 2015. This should make the currency quite appealing to investors and could strengthen the US Dollar even further. However, gold could also enjoy a boost as it’s definitely still is a safe haven for capital. Despite the recent slump in the gold price, it still is one of the (if not the) preferred assets to hold in case one wants to safeguard its capital.
This is also the position of major bank HSBC which tends to agree with out thesis as one of their analysts also indicated that putting the brake on the CHF might benefit the demand for gold. We think this is definitely the case for the capital flight of rich Russian citizens. Their country has continuously been buying gold through its central bank and this is obviously something which they keep in mind when deciding what to convert their worthless Rubles in.
The next few weeks and months will be interesting, as people and companies which are withdrawing their money from Russia really don’t have that many choices to choose from, and we expect that gold could start shining again.
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"Sprout Money" is that like those "Green Shoots" I hear about all the time?
Tsk tsk tsk...
Negative interest rates, how fucked up is that. At that rate, well i lose all interest.
"In what could be described as a rather stunning move, the Swiss National Bank (SNB) has decided to cut the interest rate on sight deposits at the SNB into negative territory. This move was necessary to defend the currency against renewed speculative positions which pushed the EUR/CHF exchange rate down again, thus increasing the pressure on the Swiss economy. As the volatility on the financial markets moved up, market participants were once again running towards the Swiss Franc as it’s still considered to be one of the few ‘safe haven’ currencies out there."
Utter bullshit. It has nothing to do with protecting the Swiss economy and everything to do with protecting Euroland banks and governments from (entirely warranted and rational) capital flight. The Swiss government is fucking over their own people (again) to facilitate the Euro governments' fucking over of theirs.
"booming" as in implosion?
This column makes no sense. If my $billions of capital was looking for a safe haven, a 1/4% fee is chump change to pay for it.
Let's dispense with the CB claptrap, and present logical reasons for imposing a fee on all of Switzerland's wealth.
"The economy is booming again (despite some dubious numbers and the current crash of the energy-related sectors)".
Um. . . . huh?
You doubt the official numbers showing improvements? ...........terrorist...
They're going all out to prop up the financial sector - while destroying anything that's actually PRODUCTIVE. I suspect we're seeing a no holds barred effort to destroy ANY threats to the $US - I do not think all this manipulation (and that is all it is) will end well. They've destroyed the fundamentals that built the US and believe now that they can force the world to support us at the end of a gun....
If interest rates are negative, are deposites considered liabilities of the customer and assets of the bank?
Deposits are money for the crap table - banks can do what they want with the money you give them to 'invest'.
My question is; If they're making record profits with OUR money, why aren't WE getting our share?
"Our share" is going to pay off the regulators and politicians so the banksters can continue to enjoy personal immunity from prosecution for fraud, market manipulation, etc. That, and paying the "fines" (read: fees) paid by the crooked corporations when the regulators need to get some extra pilf and need some headlines to show that they are doing their jobs (sarc).
The biggest impact is on the number of CHF 1000 bills issued. It went up from CHF 24 billion in 2007 to CHF 38 Billion in October. The trend will accelerate. Its easy to hide away, to transfer and it's outside the commercial banks (risky) balance sheets. If you pile it up, it makes 7.8 kilometers. The SNB will think twice before changing the print.
Can they vote again?
$1.99/gal this morning for gasoline.
Doesn't matter how cheap things are if you're not employed. Cheap oil just destroyed most of the decent jobs created over the past decade in the US. We're trying to squeeze Putin - ignorant of the blowback, or not caring.
..."with out thesis"
Without, or with OUR?
He who controls the spread sheet in the sky can manipulate till the cows come home.
There will be no audits. There's really nothing to audit ... really. Nothing.
These bastards would take the fillings out of your Grandma's teeth.....oh, wait....
I'm just glad to know that the US economy "is booming again." Here I was thinking it was in recession.
With the Fed and the mega-banks along with Wall St. carpet bombing the economy I expect peace in our time....after the rubble settles.
The future of gold...
http://www.globaldeflationnews.com/gold-elliott-wave-update-for-week-end...
These elliott-wave nuts missed the entire rise in gold from $280 to $1900 and now they claim to be experts? NEWS FLASH-Charting no longer matters as all the markets are rigged.
http://www.itulip.com/images/deflationists.jpg
seriously, does anyone here think the manipulators are going to let gold rise to crisses level prices?
if it does happen, i am thinking gold will be the LAST thing we will be concerned about. in fact it will be a big fucvkin headache when food, water and zombies will be of paramount concern...
"I am thinking gold will be the LAST thing we will be concerned about."
Only if you already have a supply.
https://m.youtube.com/watch?v=7ubJp6rmUYM
Storing gold in Switzerland would be a good option. Avoid the CHF negative rate and please the SNB.
I'm not sure we're at the bottom in gold yet. Paper and 'risk off' still in control.
http://investfts.blogspot.co.uk/2014/12/the-smart-investors-guide-to-gol...
the money line..."The (US) economy is booming again (despite some dubious numbers and the current crash of the energy-related sectors...
riiight...do you mean boom or explosion?
We'll know that when the shock wave comes through.....
buy dat shit, ha....
yes, yes, but more importantly, are there any physical metals in those Sprout PM trust funds?
do tell...
"the economy is booming", and "the Federal Reserve will likely increase rates in 2015"?????
Really??? This is hardly even worth a rebuttal. But no...the economy is not booming. Did you really fall for the obama-care creates big GDP for the economy bullshit???? LOL
And raising interest rates is just another fully loaded nail-gun waiting to go off. They can't raise rates or they blow themselves up. If anything they will have to ramp up more QE in some other stealth covert or overt way just to keep the Ponzi going.
Why did you even write this article????
Tsk, your looking at reality again. Here have a glass of Kool-Aid.....