Global Currency Wars Sees Swiss Franc Devalue 8.5% Against Gold In Week

Tyler Durden's picture

From GoldCore

Global Currency Wars Sees Swiss Franc Devalue 8.5% Against Gold in Week 

Gold is trading at USD 1,836.60, EUR 1,330.90 , GBP 1,153.90, JPY 142,750 per ounce and reached a new record nominal high in Swiss francs at CHF 1,652.83. Gold was higher in all currencies prior to sharp selling was seen in the hour after the London AM fix.

Gold’s London AM fix this morning was USD 1,879.50, EUR 1,359.39, GBP 1177.12 per ounce. Yesterday’s AM fix was USD 1,827.00, EUR 1,298.88, GBP 1146.68 per ounce.

Gold in Swiss Francs – 5 Day (Tick)

The speeches from Trichet, Bernanke and Obama were as expected and did not materially impact markets – but did belatedly confirm the extremely challenging macro environment.

Trichet’s angry outburst may lead to concerns about the long term health of euro.  The outburst came after a question from a German reporter who asked what Trichet’s message was for German people who say their country should revert to the Deutsche mark.

Risk aversion has seen equity markets in the U.S, Asia and Europe fall again and peripheral European bond yields are edging up again, as are European CDS.

Some headlines have suggested that gold is lower due to Obama’s jobs speech. This is highly unlikely as most traders were not convinced by it and gold’s sell off again has the hallmarks of official intervention. There is also chatter regarding margin calls.

It was a momentous week for markets and the ramifications of the German constitutional court decision and the SNB currency intervention have yet to be realized.

The German constitutional court decision has effectively ruled out Eurobonds which has massive ramifications for the European monetary union and the euro. While promoters of Eurobonds suggest that Eurobonds may still be possible – most objective analysts believe they are now highly unlikely.

The SNB decision to peg the Swiss franc to the beleaguered euro, thereby effectively devaluing the franc, stunned currency and wider financial markets.

It is one of the most significant currency interventions in modern history and led to violent volatility the like of which have never been seen in foreign exchange markets.

Incredibly and not widely reported the Swiss franc fell more than 7% against the euro, dollar and gold in just 15 minutes (putting gold’s relatively minor recent price fall into context).

Such volatility in currency markets was not seen during 911, the Lehman’s collapse or for any other major macroeconomic or geopolitical event in modern history.

The collapse of the Swiss franc in minutes greatly surpassed the collapse of sterling seen on “Black Wednesday” in 1992, when the British pound fell by 2.7% against the German mark on one day.

British Pound Against Deutsche Mark (GBP/DEM) in 1992 including Black Wednesday

The SNB have now threatened to buy "unlimited quantities" of foreign currencies to force down its value – thereby debasing the currency.

This has resulted in the Swiss franc falling by nearly 10% against gold for the week – from CHF 1,484 per ounce to CHF 1,620 per ounce.

The ‘hard’ currency that is the Swiss franc became not so hard – as we have been long warning it would – thereby leaving gold as the true ‘hard currency’.

The Swiss intervention reignites the global currency wars and competitive currency devaluations of fiat currencies look set to intensify in the coming months.

There are already market jitters that Japan may again seek to weaken the yen. Japan's finance minister is set to tell the Group of Seven meeting that Japan will intervene in the currency markets if there are what he termed any “excessively speculative” movements pushing the yen higher.

Continuing ultra loose monetary policies with near zero percent interest rates globally, quantitative easing and money printing and now massive currency creation and interventions is currency debasement on a scale never before seen in history.

In time, it will likely come to be seen as monetary and economic madness of the highest order.

Some economists have justified the currency debasement and global currency wars by comparing it with and the debasement of the gold and silver coin of the realm by kings and Emperors of yore (through coin clipping).

However, the scale of debasement being done today (through money printing and electronic creation) would make Roman Emperors and even Henry VIII the ‘Great Debaser’ look virtuous in comparison.

Competitive currency devaluations and currency debasement throughout history have led to inflation and the impoverishment of the mass of the people.

Gold in Swiss Francs in Nominal Terms – 40 Years (Quarterly)

The Swiss franc’s 10% plummet against gold this week clearly shows how cash is far from ‘king’ and no fiat currency in the world, in any bank in the world can be considered a “safe haven”.

Gold is again becoming the sovereign of sovereigns and reasserting itself as the safe haven money and asset par excellence.

If the Swiss franc, long considered the safest fiat currency in the world, can devalue 10% in a week, then it can happen and likely will happen to other currencies as well.


Cross Currency Table

Global diversification and allocations to gold and silver remain the prudent course of action.

For the latest news and commentary on financial markets and gold please follow us on Twitter

NEWS

(Bloomberg) -- Gold Pares Weekly Decline as Obama Plan May Boost Economy
http://www.bloomberg.com/news/2011-09-08/gold-futures-advance-for-second-day-as-bernanke-offers-no-new-growth-boost.html

(Reuters) -- INSIGHT-Investment-savvy Indians shift gold buying to bars from bangles
http://www.reuters.com/article/2011/09/09/india-gold-investment-idUSL3E7K902Q20110909

(Reuters) -- Gold heads for weekly loss after Obama's jobs plan
http://www.reuters.com/article/2011/09/09/us-markets-precious-idUSTRE78401J20110909

(Financial Times) -- Gaddafi regime sold $1bn of gold
http://www.ft.com/intl/cms/s/0/85c0912a-da1e-11e0-b199-00144feabdc0.html

COMMENTARY

(Moneyweek) -- What Switzerland’s shock currency move means for you
http://www.moneyweek.com/news-and-charts/economics/global/what-switzerlands-shock-currency-move-means-for-you-13701

(Lew Rockwell) -- Labor Day Market Bloodbath: Gold Tops $1,900
http://lewrockwell.com/celente/celente78.1.html

(Social Science Research Network) -- Mood and Precious Metal Prices
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1923788

(GoldSeek) -- China Confirms Gold Price Suppression
http://news.goldseek.com/GoldForecaster/1315530000.php

(Trader Dan Norcini)Central banks waging war on gold
http://traderdannorcini.blogspot.com/2011/09/central-banks-waging-war-on-gold-at.html

(Mineweb) -- The Ever-strengthening Case for Gold and Silver Investment
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=135114&sn=Detail&pid=102055

(ZeroHedge) -- Goldman Head Gold Trader Speculates About "Authority" Intervention In
Gold, Sees Precious Metal Pushing Higher
http://www.zerohedge.com/news/goldman-head-gold-trader-speculates-about-authority-intervention-gold-sees-gold-pushing-higher

(Professional Pensions) -- Gold – Important Diversification for Pension Plans
http://www.professionalpensions.com/professional-pensions/feature/2102458/gold-unique-commodity

Gold earns its crust as a haven asset
http://www.ft.com/intl/cms/s/0/eb342ad4-daba-11e0-a58b-00144feabdc0.html#axzz1XNrCAXxL

LBMA Gold Turnover Survey for Q1 201
http://www.lbma.org.uk/assets/Loco_London_Liquidity_Surveyrv.pdf

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hugovanderbubble's picture

Societe Generale -7%

 

AMUNDI FUNDS (REDEEMPTIONS under troubles)

Credit Agricole

Natixis

BNP 27.000 Mn.Euros in Just Italian Bonds...

 

Please TELL FRANCE IS NOT AAA TO WHOLE WORLD

GeneMarchbanks's picture

Not enough keep short-ing. The upcoming France downgrade will be epic.

I see you've edited, well, if a person can't arrive at this conclusion(that Frenchy stinks) on their own, then maybe they should lose some dough first.

unky's picture

Looking at the longer term chart I would say the Euro could drop as low as $1.18 by early 2012.

Tursas's picture

Tirchet is like all other politicians - delusional.  Trichet did not hold German inflation down "at 1.55% for 15 years".  It was the cheap import from China and other Far East.

GetZeeGold's picture

 

No no.....gold is down. Everything is OK!

Don't panic....all is well.

 

We'll just pull funds from the San Diego electric fund.......and short gold. No one will even notice.

 

unky's picture

Paper is paper and gold is the real stuff you have to own. Enough said.

Yen Cross's picture

Relax ~ Buy the ETF's  or build a Vault?

youngman's picture

"Some headlines have suggested that gold is lower due to Obama’s jobs speech. This is highly unlikely as most traders were not convinced by it and gold’s sell off again has the hallmarks of official intervention. There is also chatter regarding margin calls."

A gold investor can see thru Obamas speeches...its all talk...more debt...and will not work..no pun entended...todays drop was a computer generated drop....I bet its Obamas boys to make his speech looked like it worked...was a great success...see...gold and silver are dropping..its not working for the stock futures...but I bet it closes green too...a big celebration for 9/11 too..so it can´t go down...

trav7777's picture

there's always chatter about margin calls...Au is still well above $1800.  What's the issue?

youngman's picture

Hey Hillary is at the New York Stock Exchange.....I bet she is checking on her pork belly commodity trade...oh thats Chicago...or well..I am sure its good for a 100K gain

Medea's picture

@Nouriel just called this analysis silly on Twitter. Take that, ZeroHedge!

Meanwhile, spam futures....

Zola's picture

What a total clown this guy is , and shameless on top ! Seriously somone should go teach the "professor" and ask him to load up his savings on the double , triple short gold etfs and we will see...

machineh's picture

'Such volatility in currency markets was not seen during 911, the Lehman’s collapse or for any other major macroeconomic or geopolitical event in modern history.'

I beg to differ. Between the 6th and 8th October 1998, the J-yen popped from 136 to 108 against the USD in three days. Rumors said that it was Julian Robertson, closing out a huge short position. But an official explanation has never emerged.

Having been on the wrong side of that move, I remember it all too well.

Yen Cross's picture

The incumbent can have a rival? NO?  Hillary has bigger balls than"Slim Shadey"  any day of the week....

PulauHantu29's picture

Where are the Greeks, Spainish, Italians, etc moving all their money?

Yen Cross's picture

A trick Q/A   Operation Torque! ( AKA) Twist...

DeadFred's picture

The dollar is now the best looking gal in the contest now. What a beauty pageant! 

Are there any rumors on how much money Soros made on the franc move? It's hard to believe he was caught unawares on this and anyone who was well positioned likely made billions. Someone who good with these things titillate us with the calculations on how much a million well placed dollars would have made overnight.

LawsofPhysics's picture

What money?  Are you talking about gold? 

Cdad's picture

No rising chart, not anywhere in the market, makes me feel better than the US dollar chart.  Nothing compares.  Nothing more clearly indicates a complete loss of corrupt banker control than the USD rising.

The lemmings are running on the most crowded trade on this globe.  Sell everything....save for the studman...and ask questions later.  I suspect that is exactly what the lemming crowd will do.

MORE CRIMINAL SYNDICATE WALL STREET BANKER PINK SLIPS, PLEASE.

 

LawsofPhysics's picture

No shit, the dollar is the most abused whore at your high school prom and yet she is getting more attention than ever.  Situation status - SNAFU.

Fuck all the paper pushing fucknuts.  Let the system crash already so that compensation can return to people who are actually worth a shit.

LawsofPhysics's picture

The end game has only two options,  1) we repeat the ususal currency wars --> trade wars --> bloody war on a scale never seen before  OR 2) evolve as a species and develop realistic economic models that deal with the post-growth age.

Of course, black markets seem to be pricing this all in already.

LoneStarHog's picture

"It is highly unlikely that the SNB really wants to destroy the franc or to disrupt Switzerland’s long history of fiscal prudence. If they wanted to do that, they would have joined with the euro a long time ago, and now would be suffering the same trials and tribulations as the Bundesbank in the euro crisis.  Instead, as has happened at other times when the franc has been “too strong,” short-term action has been taken to psych-out the markets, to discourage those wanting to hold francs.  Intervention against market demand, however, as is required here, quickly becomes extremely expensive and disruptive to the intervener’s financial system.  Accordingly, the quasi-franc-euro-fix should prove to be short-lived, and the SNB knows that."
–John Williams of www.ShadowStats.com

defcon's picture

If they haven't devalued the Franc all their exporting firms would have run very soon in big trouble and with them the whole Swiss economy. I would say contrary to mr Williams, that this in fact might be the last step before joining the Euro. They already joined the free trade Schengen area and agreed on allowing a more open view on their banking system. What's left?

tradewithdave's picture

Will Shia LaBeouf star as the young and handsome J. P. Morgan in the remake of H. G. Wells, War Of The Words?

 

Book One:  The Coming Of The Bankers

Book Two: The World Under The Bankers

 

http://tradewithdave.com/?p=7913

 

Dave Harrison

www.tradewithdave.com

defcon's picture

"Competitive currency devaluations and currency debasement throughout history have led to inflation and the impoverishment of the mass of the people."

So you are saying that now the Swiss are going to be impoverished? or that they could have higher prices than what they have already?

Also I am not sure how you can call collapse a planned currency devaluation...

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

A collapse is a collapse whether caused by brown men in caves in Western Pakistan or U. S. black ops!

gwar5's picture

Bet the Swiss feel like they got royally ripped off, big time. 

 

Everyone should take note: Swiss they were lied to -- just days before the devaluation their Gov said there was "no further use to try to devalue the CHF" -- then BAMM!  That's how governments always do it to maximize their confiscation. They lie to prevent capital flight and pull in more suuckers.

And Lagarde, et al., wonder why people are losing confidence in the monetary system and their governments?

And this is how the USD will lose it's reserve status too, right after Geithner and Bernanke promise there is "zero possibility" the USD will lose reserve status.  

 

 

 

 

 

Bicycle Repairman's picture

A central bank will never "tip its hand" on a radical policy change.  The more the market is fooled, the more effective the policy change.  So don't ever expect the truth.  As the banks get cornered, expect more radical policy changes.  There is going to be greater volatility in the markets, because their policy changes will cause it.

Unleverage your investments.

chinaguy's picture

Those fuckers - sold 1/4 my CHF yesterday.

Temporalist's picture

It's quite surprising to hear Bloomberg acknowledge "Currency Wars" multiple times this AM, and discuss Gold (they had a panel with Jim Rickards and others) as money and that Central Banks can't debase it. 

 

They then laugh as if a currency war isn't a precursor to much worse wars.

 

And Lil' Tim Geetner says the problems surrounding the "recession" were worse than the Great Depression and of course they solved the problem so they are heroes (undoubtedly).

Die Weiße Rose's picture

Its not really the US Dollar is rising,

but rather the Euro and the Swiss frank falling...

the Euro is still totally overvalued as is the CHF and the AUD, not even to mention the GBP -

The high AUD in Australia causes all sort of problems like high commodity prices and mortgage Rates and Inflation,

it virtually destroyed Tourism and that is similar to Switzerland where Tourism declined dramatically because of the high Swiss Frank. No wonder the SNB pegged the CHF at 1.20 to the Euro....

one currency I can not get my head around is the british GBP, the most over-valued currency on the Planet.

1 GBP = 1.60 USD and 1.50 AUD and 1.38 CHF and 1.14 Euro....

how can this possibly make any sense in this world of relativity ? 

bloody POME's

warchopper's picture

Interactive Brokers Bulletin Board

To CME,GLOBEX traders:
Fri Sep 9 09:41:36 2011 EST

Please be informed that the CME/GLOBEX is increasing the margin requirement on the CHF future to $6,000 after the close today (following yesterday's increase to $5,000). Please visit the exchange website for additional information regarding exchange margin requirements.