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Swiss Franc Collapses 7% - Swiss National Bank to Fix CHF to EUR and Debase Currency

Tyler Durden's picture





 

From GoldCore

Swiss Franc Collapses 7% - Swiss National Bank to Fix CHF to EUR and Debase Currency

Currency markets have seen massive volatility this morning after the Swiss National Bank decision to fix the Swiss franc to the euro.

Gold is trading at USD 1,899.50, EUR 1,339.10, GBP 1,177.30, CHF 1,611.10 (up from CHF 1,486.50 yesterday) and JPY 146,350 per ounce. Gold is down 0.18% in dollar terms and strong physical demand continues at these levels.

Just prior to the announcement, spot gold for immediate delivery had risen to a new record nominal high of $1,921.15/oz in early morning trading in Europe.


Cross Currency Table

Then just before 0900 hours GMT came the news that the Swiss National Bank has decided to fix the country's exchange rate at 1.20 Swiss francs per euro. The SNB indicated it would buy an unlimited amount of euros regardless of the risk to maintain that value.

In a matter of minutes, gold fell 3% from the high of $1,921.15 to an inter day low of $1,862.72. It then recovered as quickly and surged back to over $1,912/oz.

Gold’s London AM fix this morning was USD 1,891.00, EUR 1,330.75, GBP 1,172.86 per ounce. Gold fixed lower in all currencies (USD 1,896.50, EUR 1,341.13, GBP 1,174.67 per ounce).

The SNB announced the currency fix because of what it called "the current massive overvaluation of the Swiss franc."

It said it will "no longer tolerate" an exchange rate below the minimum rate of 1.20 francs, which it said is still high.


Gold in Swiss francs – 1 Day (Tick)

The euro, which had been trading at close to 1.10 Swiss francs before the announcement, surged 9% to 1.2024 in the minutes afterwards. 

Given the inherent frailties of the euro, it is more apt to say that the Swiss franc plunged 9% against the euro.

The SNB said in a statement that it "is prepared to buy foreign currency in unlimited quantities."

The SNB has once again clearly indicated that the so called safe haven currency that is the Swiss franc is set to be debased alongside the dollar, the euro, the pound and all fiat currencies.

Gold’s volatility is often overstated and the moves this morning are purely a function of massive volatility being seen in the international currency markets.


Gold in Swiss francs – 1 Year (Daily)

This volatility is set to continue and increase in coming months as the ramifications of QE1, QE2, further quantitative easing and injections of trillions of dollars, euros, pounds, yen and Swiss francs into the global financial system are felt.

Such volatility will of course be beneficial to gold as it will lead to further diversification into gold as store of wealth buyers, including central banks, seeking to protect themselves from currency volatility and the debasement of currencies internationally.

While the SNB news has provided a short term boost to the euro, the outlook for the ‘single’ currency is uncertain to say the least, despite massive denial amongst decision makers.

While all the markets are focusing on the SNB announcement today, its timing is interesting as it comes a day before a critical decision regarding the future of the European project, the European Union and the euro itself.


The Federal Constitutional Court (Bundesverfassungsgericht), Karlsruhe, Germany

The Federal Constitutional Court will issue a ruling on the legality of last year's bail-out packages tomorrow at 10:00. 

The court is expected to demand that the German government does more to ensure "democratic legitimacy" for its support for European wide bail-outs and to set conditions on continuing German support for the policy.

It is also possible that the court could throw the euro into chaos. Many analysts warn that the judges are likely to impose restrictions on the German government that could make decision making in the zone even more cumbersome than it already is.

It is also possible that the panel of judges ban Germany from taking part altogether, a drastic step that would deprive the EU rescue fund of its biggest contributor and undermine the very integrity of the euro.

Given these and the myriad of other macroeconomic, geopolitical and systemic issues facing the global financial and economic system today, it is amusing that some can confidently assert that gold is a bubble.

Unfortunately, this leads to people again being lulled into a false sense of security and to a lack of real diversification.

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

SILVER 
Silver is trading at $41.77/oz, €29.49/oz and £25.97/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,860.00/oz, palladium at $762/oz and rhodium at $1,800/oz. 

NEWS
(Business Week) 
Gold Falls From Record in London as SNB Imposes Franc Ceiling

(Reuters)
Gold falls from record after Swiss peg franc

(Bloomberg)
Gold Rises Above $1,900 an Ounce as Growth, Debt Concerns Enhance Demand

(Reuters)
Gold surges to record on euro zone woes

(Financial Times)
Gold nears record as it passes $1,900 for second time

(Bloomberg)
Marc Faber Says Gold Is No ‘Bubble’ as Price Climbs Above $1,900 an Ounce

COMMENTARY
(Financial Times)
Gold has Endured as a Protection of Wealth for More than 6,000 years

(King World News)
Turk - Historic Event as Gold Surges & Stock Markets Tumble

(The Daily Reckoning)
Why silver will be in the hundreds within two years

(Gold Antitrust Action Committee)
More Beijing embassy cables show China sees gold as central in currency war

(Financial News)
Growing number of investors are getting ready to cope with catastrophes

(ZeroHedge)
Bring Out Your Dead - UBS Quantifies Costs Of Euro Break Up, Warns Of Collapse Of Banking System And Civil War

(The Telegraph)
Please, no more QE until really needed‎

(CNBC)
Why Any Euro Exit Would Cause 'Complete Chaos'

 


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Tue, 09/06/2011 - 08:19 | Link to Comment thedrickster
thedrickster's picture

Race to the bottom bitchez.

Tue, 09/06/2011 - 08:22 | Link to Comment yakmerchant
yakmerchant's picture

Yup.  They've been warming up the tires for a while now, but this is definitely the green flag.

Tue, 09/06/2011 - 08:30 | Link to Comment MarketTruth
MarketTruth's picture

Agree, and anyone who believes in paper currencies... this should be a big wake up call that one day you could be down 7% at the whim of a central bank. So those bonds/treasury/etc you may hold at 2% becomes immediately underwater in an instant.

Tue, 09/06/2011 - 10:10 | Link to Comment SilverRhino
SilverRhino's picture

Playing Devil's Advocate for a second.   What exactly was that 49 to 42 dollar drop in May of silver in one day but another manipulation by central banks?  

Gold and silver are THE savings forms of choice, but that doesn't mean that CB shitheads cannot manipulate those bastards as well. 

Tue, 09/06/2011 - 10:15 | Link to Comment MarketTruth
MarketTruth's picture

Perhaps true, yet gold and silver have intrinsic value/worth. Meanwhile currencies are backed by the 'full faith' of being able to tax a country's citizens endlessly, as nothing else of real value backs the Euro, USD, etc.

Tue, 09/06/2011 - 10:27 | Link to Comment SilverRhino
SilverRhino's picture

Perhaps true, yet gold and silver have intrinsic value/worth.

Complete agreement on that one.  A-freakin-men.

Damn, just remembered the Belarus rouble revaluation as well.   50% with the stroke of a pen.    

Tue, 09/06/2011 - 10:30 | Link to Comment FeralSerf
FeralSerf's picture

The CBs can't really manipulate the value of gold.  That's only an illusion.   All they can really do is manipulate the value of their fiat currencies in relation to gold (and to everything else too).

Tue, 09/06/2011 - 10:17 | Link to Comment global
global's picture

If the Fed announced tomorrow that there will be no further QE, and that they were in fact going to decrease the money supply, what do you think would happen to gold?

Don't argue what the chances of this are, simply what the outcome would be.

I know there is almost zero chance this happens, but realise that fiat currencies are not the only thing priced at the whim of central banks

Tue, 09/06/2011 - 12:59 | Link to Comment Kat
Kat's picture

If you're simply using gold to hedge your fiat currency risk, you wouldn't worry about that.  

Ostensibly, you're very long whatever fiat currency you earn in.  A drop in the price of gold in terms of that currency means your buying power has increased and you win on that leg of the trade.

That's completely different than manipulating the price of gold by changing the margin rules (or, as they did in 1981 with Silver, refuse to allow buy long orders) while still printing money like...well...like a central bank.

Tue, 09/06/2011 - 08:23 | Link to Comment trav7777
trav7777's picture

yeah...a gigantic move, huge intervention.

PIIGS and E Euro debt fallout must be crushing them

Tue, 09/06/2011 - 08:25 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

No kidding... This is a 20 sigma move in the chf. The swiss are trying to protect their exports. But it's likely they're already in recession.

This is why gold and silver are important. You don't have some central bank debasing the money to prop things up short term.

Tue, 09/06/2011 - 08:39 | Link to Comment Pladizow
Pladizow's picture

Hopefully P.A.G.E will help prevent this in gold.

Unless Asia unites with the manipulators - but I cant think of a reason why.

http://www.goldmoney.com/gold-research-videos.html

Tue, 09/06/2011 - 08:33 | Link to Comment trav7777
trav7777's picture

exports?  Lol...no, it's about their banking system which IS their major export.  The Swiss are hardly a manufacturer or mercantilist.  They're a lender, like Iceland was.

They flooded the EU with CHF denominated debt and now it is defaulting, driving the currency skyhigh in deflationary collapse.  And people thought it was safe harbor trade?  You call THIS a safe harbor?  ROTFL. 

When loans default or bust up, the amount of currency in circulation vaporizes and you have deflation.  That's what this is.  Compared to its economy, the amount of CHF debt out there is larger than any other banking system, by far.

Tue, 09/06/2011 - 08:37 | Link to Comment Howard_Beale
Howard_Beale's picture

CHF - It's what's for dinner.

Tue, 09/06/2011 - 08:45 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

Swiss still make coo coo clocks, cheese, and down hill racers...

Swiss banks have been impaired by too many regs re US depositors...

Tue, 09/06/2011 - 10:07 | Link to Comment JW n FL
JW n FL's picture

it is a shame that those hand cuffs were put on all those Job Creators.. we were so close to mission accomplished!

No worries! soon God will put someone in the white house that takes away all those hardships!

Tue, 09/06/2011 - 10:36 | Link to Comment FeralSerf
FeralSerf's picture

Not too many "coo coo" clocks are made in Switzerland. It was always mostly a Black Forest German elf thing, at least until the Chinese got into the act.

http://www.swissinfo.ch/eng/Home/Archive/Going_cuckoo_about_real_Swiss_c...

But it can be argued that the Swiss have now gone "coo coo", sans clocks.

Tue, 09/06/2011 - 08:46 | Link to Comment Pladizow
Pladizow's picture

"The last time the SNB carried out a similar measure, in October 1978 when a floor for the now-defunct deutschmark against the franc was introduced, inflation soared, peaking at over 7 percent in 1981. The Swiss abandoned the policy in 1982." - Cut 'n' Paste.

Tue, 09/06/2011 - 08:54 | Link to Comment shortus cynicus
shortus cynicus's picture

When loans default or bust up, the amount of currency in circulation vaporizes and you have deflation.

Are you sure?

I suppose, when you pay debt back currency "vaporizes" like your vaporizing debt.

But in case of default currency stays in some saving account without counterpart debt or equally worth collateral backing it.

So massive defaults would debase CHF causing loss of value.

Just imagine extreme case: all CHF debtors default at once and give middle finger as collateral. What would CHF holders do with that currency which nobody needs now? They wold dump it, causing CHF to implode.

Tue, 09/06/2011 - 09:47 | Link to Comment pods
pods's picture

Debt IS currency.  Default and...........It's gone.

pods

Tue, 09/06/2011 - 09:54 | Link to Comment tmosley
tmosley's picture

Incorrect.  Debt is currency.  Default and........it sticks around forever.  Pay it back, and it's gone.

This is fundamental for understanding what is to come.

Tue, 09/06/2011 - 10:12 | Link to Comment pods
pods's picture

Sorry mos, if there were one currency unit for each credit unit you would be correct.

But there is not.  Why do you think deflation is so feared?  If everything in a market had to be valued to the currency in circulation, there would be deflation to the point where the system collapses.  We use credit AS currency.  

If I owe you a bazillion dollars, you treat that as an asset.  If I default, then what?  The credit vanishes and you are left with an IOU that cannot be exchanged for squat.  When it is said that we have a fiat currency, that is not accurate.  We have a debt backed unit.  Less debt, more valuable the unit.  

pods

Wed, 09/07/2011 - 05:26 | Link to Comment shortus cynicus
shortus cynicus's picture

Only small amount of IOUs are used as savings. If such IOUs default, savers have less to spend. But on the other way, the borrowers have not to pay it back, so they can spend more - it's neutral for prices and money amount. 

But most IOUs are assets of the banks created using fractional reserve system only by the banks for the banks and are not circulating as payment medium or saving of real people or companies. If this IOUs became worthless, banks are in theory required to redeem equal amount of money from circulation at any cost, but if they go bankrupt, there is no way accomplish this task, so money stick in circulation to the death of this particular fiat currency (hyperinflation).

 

Tue, 09/06/2011 - 10:45 | Link to Comment FeralSerf
FeralSerf's picture

No -- all currency is debt of the issuer, but not all debt is currency.

Tue, 09/06/2011 - 09:54 | Link to Comment Infinite QE
Infinite QE's picture

Well put!

Tue, 09/06/2011 - 11:59 | Link to Comment Ghordius
Ghordius's picture

Even though I find your avatar cool and many of your posts hilarious: Hogwash.

Switzerland is lousy with family-owned mid-sized companies who produce a myriad of "things that go in other things", same as the German "Mittelstand". No, they are not listed in any exchange, this might be the reason why you don't read of them often.

Meanwhile, I visited Switzerland and the country was littered with advertisements for "Currency Rebates" where retailer promised to go down 20% on most prices and "please, dear customer, don't go shopping in the EU".

Their media last week was full of politicians asking the SNB to "do something, soon" because exports were dropping like a stone. Today, all parties were full of praise for Hildebrand and even asking for a higher floor. And by the way, a huge chunk of this EuroSwissie debt/mortgage idiocy was given by banks in the Eurozone, particularly by Austrian banks - some of them have been bought by the Italian Banks which have so much troubles.

Tue, 09/06/2011 - 14:12 | Link to Comment trader1
trader1's picture

trav7777, 

you may want to re-consider your opinion about switzerland being "hardly a manufacturer".  

http://www.tradingeconomics.com/switzerland/exports

http://www.tradingeconomics.com/switzerland/industrial-production

 

Tue, 09/06/2011 - 09:06 | Link to Comment Smiddywesson
Smiddywesson's picture

This is a 20 sigma move in the chf.

Quack, quack.  I hear an entire flock of swans on the horizon.  Do black swans quack?  If not, I'm going to buy them all duck decoys with my gold proceeds.

Tue, 09/06/2011 - 08:22 | Link to Comment speconomist
Tue, 09/06/2011 - 08:20 | Link to Comment GoldMeUp
GoldMeUp's picture

GOLD TO THE MOON

Tue, 09/06/2011 - 08:21 | Link to Comment godzila
godzila's picture

Interesting and bold move by the SNB... might be suicidal though...

Tue, 09/06/2011 - 08:24 | Link to Comment trav7777
trav7777's picture

they ain't got a choice...too much deflation in CHF debt methinks

Tue, 09/06/2011 - 08:26 | Link to Comment cossack55
cossack55's picture

Seen any Japanese looking financial types hanging around Zurich lately?

Tue, 09/06/2011 - 08:33 | Link to Comment Dr Zaius
Dr Zaius's picture

You mean other than those shady looking guys holding Bearer Bonds?  Nope.

Tue, 09/06/2011 - 08:43 | Link to Comment cossack55
cossack55's picture

lol

good memory

Tue, 09/06/2011 - 08:27 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Long term, likely as they're full retard right now.

They say they're worried about deflation.

Tue, 09/06/2011 - 08:21 | Link to Comment Minoan
Minoan's picture

Bringing a Swiss Army Knife to a gold-digging

Tue, 09/06/2011 - 08:22 | Link to Comment Double down
Double down's picture

How stupid can money get?

In a matter of minutes, gold fell 3% from the high of $1,921.15 to an inter day low of $1,862.72. It then recovered as quickly and surged back to over $1,912/oz.

Tue, 09/06/2011 - 08:24 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

Shanghai raised margin rates... So there are multiple factors at work (as usual)... but not all is reported...

"SHANGHAI (Commodity Online) : China’s largest Gold exchange, The Shanghai Gold Exchange will raise trading limits and margin requirements on its gold and Silver forward contracts on Sept. 9 to prevent excessive volatility.


In a statement, SGC said it will temporarily raise trade margins and daily trading limits for both its gold and silver forward contracts ahead of a long weekend to allow traders more latitude to adjust to overseas price movements.
Chinese exchanges are closed Sept 10-12 for the Mid-Autumn Festival.
Trading margins for the gold forward contract, Au(T+D) , will be raised starting Sept 9 to 13 percent from 12 percent, while the daily circuit breaker would be lifted to 10 percent from 9 percent.
The Silver Gold forward contract, Ag(T+D) , will also see its trading margin raised by one percentage point to 16 percent, while daily movement will be raised to 12 percent, from 10 percent.
The SGE said the collateral and daily price limits for both contracts would revert back to their pre-holiday levels on Sept. 14 if those limits were not breached on the first day of market re-opening on Sept 13."

http://silverdoctors.blogspot.com/2011/09/shanghai-gold-exchange-hikes-gold.html

Tue, 09/06/2011 - 08:22 | Link to Comment falak pema
falak pema's picture

I hope ORLY didn't lose her shirt or her panties on this! I know she was fond of CHF trades.

Tue, 09/06/2011 - 08:39 | Link to Comment Howard_Beale
Howard_Beale's picture

Anyone who stays positioned over the weeked in currencies deserves to lose their shirts.

Tue, 09/06/2011 - 10:51 | Link to Comment FeralSerf
FeralSerf's picture

Unless all your assets are the physical variety, you have no choice but to be positioned "over the weekend" in some currency.  They're what I need to pay my bar bill.

Tue, 09/06/2011 - 08:44 | Link to Comment Max Hunter
Max Hunter's picture

A lot of people must have. I was looking at a 5 min chart. The entire move happened in 15 minutes.. Stops are not honored by most platforms when it skips that fast.. At least on the msg boards i've been on the traders complain about it.. .. I would have love to have seen that move in real time.. EUR/USD jumped almost 300 pips in 5 minutes too.. These moves can easily crash accounts..

Tue, 09/06/2011 - 09:23 | Link to Comment Smiddywesson
Smiddywesson's picture

There were some hard lessons learned about leverage this week.

A lot of traders are also learning that a stop is like a federal reserve note, maybe the promise will be honored, and maybe not.

I wonder if we will see the stock market go limit down, for days on end, before this is over.  That should disabuse a lot of "traders" about the effectiveness of stops.

Tue, 09/06/2011 - 08:24 | Link to Comment cossack55
cossack55's picture

Cheap chocolate and I am buying me one of them purdy cows with the bell.

Tue, 09/06/2011 - 08:26 | Link to Comment Pretorian
Pretorian's picture

Is GOLDMAN ACCOUNT with enough COLLATERAL????MARGIN CALL BITCHESSSSSS

Tue, 09/06/2011 - 08:23 | Link to Comment Archimedes
Archimedes's picture

The swiss don't have enough cash or a large enough economy to buy unlimited Euros. Unless they plan on printing more Swiss francs. This is getting just plain stoooopid!

 

Tue, 09/06/2011 - 08:26 | Link to Comment trav7777
trav7777's picture

yes, well then it is time to pay the piper for the outrageous size of their banking sector.  The Swiss have made hay for a century on banking alone...besides watches and chocolate, what else are they known for?

UBS and CS are balls-deep in loans all over crashifying Europe.  The default driven deflation in the CHF must be off the scale for them to resort to a move this drastic

Tue, 09/06/2011 - 08:34 | Link to Comment theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

Shit do you think I should get my gold out of Zurich?? Marc Raber warned about this!

Tue, 09/06/2011 - 09:27 | Link to Comment DosZap
DosZap's picture

<theMAXILOPEZpsycho 

 

WHAT GOLD?

Tue, 09/06/2011 - 08:28 | Link to Comment Captain Benny
Captain Benny's picture

Agreed the plan is stupid and will backfire eventually.  For now it just scared a butt load of people out of CHF.  Jim Rickards should be happy to see the next step taken in the currency wars.  Two big events recently: Brazil's rate change and also this CHF pegging.

This war is escalating rapidly.

Tue, 09/06/2011 - 08:30 | Link to Comment Dr Zaius
Dr Zaius's picture

Unless they plan on printing more Swiss francs.

BINGO!

Tue, 09/06/2011 - 09:39 | Link to Comment Smiddywesson
Smiddywesson's picture

The swiss don't have enough cash or a large enough economy to buy unlimited Euros.

Ding!  We have a winner.  Archimedes wins today's big brain award.  Yes, the Swiss cannot carry on indefinitely with their stated intentions.  It seems every country is committing suicide to kick the can.  Hmm, either they have all gone crazy at the same time, or maybe, just maybe, they know the current system will be a memory soon and the fiat squandered kicking the can won't matter?

Now what are they all doing besides kicking the can?  Hint:  It's shiny, it's traditional, and you can't eat it.

Tue, 09/06/2011 - 11:10 | Link to Comment FeralSerf
FeralSerf's picture

The SNB can print as many CHFs as they think is necessary.  It's their job.

Switzerland is now effectively the newest member of the euro zone.  The only difference is they can quit easier than Germany.

Tue, 09/06/2011 - 08:24 | Link to Comment ArkansasAngie
ArkansasAngie's picture

And ... how long did it last?

I've got to admit ... I go to the fair to see people and animals.  I don't like the rides.

Good thing I got my chair nowhere near this extravaganza

Tue, 09/06/2011 - 08:24 | Link to Comment mtthw2
mtthw2's picture

It's a fart in a hurrricane

Tue, 09/06/2011 - 08:24 | Link to Comment stateside
stateside's picture

What bubble in gold?  The Canadian Gold Junior Exploration companies are off 50-75% this year and at multi-year lows.  How can you have a gold bubble when the underlying equities are in a deep, deep bear market?  These juniors will make your head spin once the gold bull really gets going.  Think of the small, internet stocks on steroids in 1998-1999. 

stateside

http://www.statesidereport.com

 

Tue, 09/06/2011 - 08:25 | Link to Comment vortex
vortex's picture

Gold reaction mean that the market anticipate that SNB will also sell Gold to maintain the peg...

Tue, 09/06/2011 - 08:27 | Link to Comment Dr Zaius
Dr Zaius's picture

Only to then realize that the Swiss will be firing up the printing press like every other nation around the globe.

Tue, 09/06/2011 - 08:29 | Link to Comment Quintus
Quintus's picture

Nonsense.  Why would they do that? They'll just print more Francs.  It's almost free you know, or as the Bernank put it money can be created '...at essentially no cost'.

The reaction was because all those Algos that use the Swissie as a proxy for risk appetite saw a 1000pip move and assumed that all risk everywhere had been banned.  So they sold gold.  I'm sure the big metals shorts enjoyed the ride too, and no doubt helped it along before doing some short-covering at the bottom.

Tue, 09/06/2011 - 08:39 | Link to Comment GoldMeUp
GoldMeUp's picture

Agreed.  Why would they sell gold?  That makes no sense at all.  They need more francs to match the demand for francs which is sending the franc up.  So they print more francs.  They get to build their forex reserves for 'free' (or the cost of printing the paper).

Tue, 09/06/2011 - 09:24 | Link to Comment Motley Fool
Motley Fool's picture

Ah. Thanks Quintus. I was wondering. Bloody algo's.

Tue, 09/06/2011 - 12:08 | Link to Comment Ghordius
Ghordius's picture

Quintus, you are an island of sanity and understanding in a sea of comments all hating CB's for the wrong reasons and for lousy assumptions... Thanks.

If humanity would cease to exist, what would happen in the world of the Algos? Would they notice our absence or go into a frenzy?

Tue, 09/06/2011 - 09:45 | Link to Comment Smiddywesson
Smiddywesson's picture

Perhaps they will, but do the Swiss have enough gold to significanly depress world gold prices?  More importantly, will they be willing to dump gold reserves when all other central banks are buying?  I doubt it very much.  Yes, the REACTION may be in recognition of this as a possibility, but the reality will be quite different.  The Swiss are not stupid enought to sell their gold.

Tue, 09/06/2011 - 12:13 | Link to Comment Ghordius
Ghordius's picture

Most Central Banks agreed long ago that they won't touch the yellow metal, except in special mutually agreed cases.

The agreement is quite old now and only "rogue" CB's break it, to date.

They don't hate Gold, they try very hard to ignore it.

Tue, 09/06/2011 - 08:25 | Link to Comment Mediocritas
Mediocritas's picture

Just occurred to me that SNB may have been tipped into pegging because the ECB is about to roll over and launch QE, Fed style (QE1).

I mean, does the ECB really have any choice here?

FINALLY I might make some decent money on my EUR short.

Tue, 09/06/2011 - 08:27 | Link to Comment cossack55
cossack55's picture

Dollar swap window.

Tue, 09/06/2011 - 08:33 | Link to Comment Mediocritas
Mediocritas's picture

Good for eurodollar component but only good for euro component so far as each side of the pond has stockpiles of each others' currency. After that, it's pure euro QE all the way and swap lines are out of play. Fed on the sidelines unless it takes a political risk and intervenes directly in Europe by buying euro-denominated sovereign debt enabled by swaps with the ECB (bringing the swap line back into play).

It's one thing for the Fed to enable eurodollar liquidity, it's quite another for the Fed to enable euro liquidity. Big call for them to do the latter.

Tue, 09/06/2011 - 08:27 | Link to Comment trav7777
trav7777's picture

they don't have a choice.

Europe is seeing their LEH period here.  The question is how deep do they let it go before they start aping the Fed?  Is this the first wave, a la BSC that we're seeing here or is it the real meat of the crash?

Tue, 09/06/2011 - 11:15 | Link to Comment FeralSerf
FeralSerf's picture

The ECB doesn't have any other choice except QE monetization of debt if it's determined to keep all its current members in the fold.  And that's how empires keep getting larger (until they can't anymore).

Tue, 09/06/2011 - 08:26 | Link to Comment youngman
youngman's picture

Stop loss harvesting??????  What a drop and for what?????  Gold and silver are now the last safe haven...the Yen and dollar are not in my book....and it drops...to me it was just the big boys with the HFT´s harvesting the low hung fruit...

Tue, 09/06/2011 - 08:26 | Link to Comment Dr Zaius
Dr Zaius's picture

It will be interesting to see how this sits with the Swiss public. Afterall, they are the ones that will ultimately paying for the decision by the Swiss National Bank.  Buying unlimited quantities of rapidly devaluing foreign currencies doesn't sound cheap or sustainable. 

Tue, 09/06/2011 - 08:28 | Link to Comment youngman
youngman's picture

If I was a Swissy......lol...I would be going down to the bank and buying gold today.....

Tue, 09/06/2011 - 08:37 | Link to Comment Quintus
Quintus's picture

Would have been much better to have done it yesterday.

Why anyone would keep their wealth in paper when a madman in a corner office of a central bank building can essentially sieze 7% (or any percentage he likes really) of it instantly I simply do not know.

And to think that people blather on about 'Gold confiscation' all the time.  Ha!

Tue, 09/06/2011 - 09:51 | Link to Comment Smiddywesson
Smiddywesson's picture

It will be interesting to see how this sits with the Swiss public. Afterall, they are the ones that will ultimately paying for the decision by the Swiss National Bank.  Buying unlimited quantities of rapidly devaluing foreign currencies doesn't sound cheap or sustainable. 

I don't know that the Swiss public will get any more say than the American public did.  Central banking frowns upon full disclosure and the democratic process. 

The SNB knows it's not cheap or sustainable, and they did it anyway, so we have to assume the time they are buying is worth more to them than their balance sheet.

Tue, 09/06/2011 - 11:18 | Link to Comment FeralSerf
FeralSerf's picture

In Switzerland national referendums can be a problem.

Tue, 09/06/2011 - 08:26 | Link to Comment monopoly
monopoly's picture

And I slept through all of this. Yikes.

Tue, 09/06/2011 - 08:28 | Link to Comment aleph0
aleph0's picture

and undermine the very integrity of the euro.

 

Ahem !

Tue, 09/06/2011 - 08:28 | Link to Comment mkanterm
mkanterm's picture

Technically it is not a peg or a fix but a price ceiling, good old econ 101. They said at least 1.20 but it could go higher, which they, along with UBS, CS, and all of the other companies want it back near 1.40. I think Trichet will do everything in his power (and by do everything, I mean do nothing, stand by idly, defend inflation, and let the Euro collapse) to make this reverse however.

Tue, 09/06/2011 - 08:35 | Link to Comment Pladizow
Pladizow's picture

The peg is a minimum.

Tue, 09/06/2011 - 08:29 | Link to Comment mkanterm
mkanterm's picture

Technically it is not a peg or a fix but a price ceiling, good old econ 101. They said at least 1.20 but it could go higher, which they, along with UBS, CS, and all of the other companies want it back near 1.40. I think Trichet will do everything in his power (and by do everything, I mean do nothing, stand by idly, defend inflation, and let the Euro collapse) to make this reverse however.

Tue, 09/06/2011 - 08:28 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

"The Canadian Gold Junior Exploration companies are off 50-75% this year and at multi-year lows"

Gold Miner = Liar standing next to a hole in the ground

Perhaps the Jrs are priced correctly?

Tue, 09/06/2011 - 11:17 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

not according to graceland stewie thomson this morning, snide:  Attention Gold Juniors: Report To LaunchPad

Robo_T has correctly reported on the seniors since the Spring, that they were being sold as part of a "pair"~~buy gold. sell the GDX; this is done;  the fork has been stuck into it, and GDXJ is ready to rrrrumble!  he has the charts

also, according to someone of no less stature than ted butler, my analysis that gold is "tired" technically is dead wrong, it is the commercials who are tired of getting their tushes kicked: The Death of Liquidity and they aren't fading the traders to the extent they have, historically, and the new "short-sellers/ liquidity providers" will not provide the volume, causing price swings very much like we've seen this morning, around the swissie

now, what is the SNB doing here?  they didn't tell me!  no one seems to consider that they are jawboning.  wtf?  why not?  they just finished telling us why they wouldn't do this, and i thought it was the best decision.  now, they are "all in"?  really?  well. the market reacted!  that's abt all that i can see happening.  they saved the euro, today, of which they may be holding more than a few, and they may not have done anything except talk.  why can't they change, their mind, again, in a few days?  i agree, this could be suicide but certainly not if it is jawboning, but Trav may have a good point abt deflation.  personally, i see it not as a "move" but, so far, as talk, which of course tout le monde must react to instantly, b/c they might not change their minds.  funny, tho, with the dollae going into the crapper, no problem, but they are now supporting the "other half of the EUR/USD pair" and the inplication must certaily be that this will also stop the dollar "index" from going too much higher, here, too.  orderly markets re-established?  i think the top banksters had a conference call and "would you mind saying a few words tomorrow?"    "nope.  i'll get to it right before you open, ok?"

Tue, 09/06/2011 - 11:22 | Link to Comment FeralSerf
FeralSerf's picture

"Gold Miner = Liar standing next to a hole in the ground"

Central Banker = Liar standing next to a printing press.

At least some of the gold miners have dirt under their fingernails.

Tue, 09/06/2011 - 08:30 | Link to Comment Tao 4 the Show
Tao 4 the Show's picture

This has far more implications than discussed so far, IMO. ECB practically has to print if Euro is to be saved. That means SNB will have print as well. SNB must also believe Euro will be saved and some kind of stability reached.

Gold in CHF passed 1600 to reach new highs. All is being surrendered to maintain status quo, with no regard to traditional indicators like gold.

Interesting times.

Tue, 09/06/2011 - 08:48 | Link to Comment Zero Debt
Zero Debt's picture

Hostile currency movements? Retaliate with more debasement!

Restless populace demanding food and energy subsidies? Print more money!

Falling exports? Devalue the currency already!

Bank troubles? Buy up their debt with fresh credits!

 

 

Tue, 09/06/2011 - 09:57 | Link to Comment Smiddywesson
Smiddywesson's picture

"All is being surrendered to maintain status quo, with no regard to traditional indicators like gold" except that all the central banks surrendering everything to maintain the status quo are also buying gold.

There, fixed it.

Maybe gold is their goal line, not a traditional indicator.  Maybe they are abandoning the old system for a new system, then their actions make sense.  It is impossible for all the central bankers of the world to go crazy or become stupid, all at the same time, all over the world.  The SNB knows exactly what is doing, as does the ECB, the Fed, and the Chinese.

Tue, 09/06/2011 - 08:31 | Link to Comment Global Hunter
Global Hunter's picture

And there is not a thing that NATO can do about it, if they couldn't topple Libya in a desert, there's no way they'll be able to invade a country in the Alps where the citizens have guns and bicycles.

Tue, 09/06/2011 - 08:31 | Link to Comment gwar5
gwar5's picture

CHF last week: "No use trying to limit rise in CHF"   CHF this week: "Peg to Euro!" 

 

Take home message: don't believe a word any of them say, they know there's a sucker born every minute. 

Next up = more gold price manipulation, closing the rest of the few remaining exits.  

 

 

 

Tue, 09/06/2011 - 08:35 | Link to Comment YHC-FTSE
YHC-FTSE's picture

Fair comment. They've cried wolf a few times in the recent past, but I think this one is for real.

Tue, 09/06/2011 - 08:38 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

"Next up = more gold price manipulation, closing the rest of the few remaining exits."

Already begun in Shanghai...

"SHANGHAI (Commodity Online) : China’s largest Gold exchange, The Shanghai Gold Exchange will raise trading limits and margin requirements on its gold and Silver forward contracts on Sept. 9 to prevent excessive volatility."

http://silverdoctors.blogspot.com/2011/09/shanghai-gold-exchange-hikes-gold.html

Tue, 09/06/2011 - 10:00 | Link to Comment Smiddywesson
Smiddywesson's picture

If I were them I would defend the $2000 line as aggressively as possible.

Tue, 09/06/2011 - 08:49 | Link to Comment Zero Debt
Zero Debt's picture

Next up CHF/USD and CHF/JPY peg?

Tue, 09/06/2011 - 08:58 | Link to Comment eaglefalcon
eaglefalcon's picture

gold manipulation is awesome!  at least this exit remains open for the time being.

Tue, 09/06/2011 - 08:33 | Link to Comment YHC-FTSE
YHC-FTSE's picture

There have been at least 3 articles on the CHF/EU tease fest, but nobody believes it until it actually happens. This probably marks the moment when the Euro became a serious alternative as the reserve currency. (I suppose the Pentagon might dust off a few old invasion plans for continental Europe now). It does not, in any way or form, solve the impending crises in the EU banks and a highly likely default by Greece, but at least it makes the Euro slightly less likely to collapse than the USD. For those still wondering why the Swiss would do such a thing, it has been explained to death already, but in 7 words: Exports and export partnerships in the EU.

Tue, 09/06/2011 - 08:38 | Link to Comment ArkansasAngie
ArkansasAngie's picture

Dang ... just how long did you think that tea pot would work?

Tue, 09/06/2011 - 10:04 | Link to Comment Smiddywesson
Smiddywesson's picture

Everything that's been done to date has been orchestrated by the Fed and ECB.  Why would the Fed bail out European banks just to orchestrate an invasion?  Poppycock. 

All the central banks are kicking the can and buying gold.  They are still in control and won't do anything to upset that control.  China doesn't like that, but too bad.  China is going to get screwed whether they like it or not.  The Western central banks are not going to shoot themselves in the foot by turning on one another.

Tue, 09/06/2011 - 12:23 | Link to Comment Ghordius
Ghordius's picture

I mostly agree...

A small detail for the armchair warmongerer ;-)

The Pentagon does not need any invasion plans for continental Europe.

A big chunk of the military forces of the United States of America have their home bases in continental Europe.

Not only Army and Airforce, look up where the home base of the Sixth Fleet is.

Tue, 09/06/2011 - 16:42 | Link to Comment YHC-FTSE
YHC-FTSE's picture

Sure, it was a bit tongue in cheek. :)

But the lesson is, when it comes to the USA, the most paranoid country in the world by the huge factor of their military spending (More than all of the next top 10 big military spenders combined), you can bet that nothing is off the table. People often talk about enlightened self-interest, but a lifetime of experiences tell me that the CIA, NSA, the Pentagon, and a few other agencies exist to serve the interests of a lot of very powerful players on the world stage - Israel, Banks, Energy, and who the fuck knows. Sometimes their interests converge and sometimes they diverge, but you can bet that when it comes to preserving the USD as the world's reserve currency, they will band together to kill anyone who opposes its supremacy. Nobody is safe from these sociopathic lunatics. Any country can suddenly become a "Regime", full of "Terrorists". Besides, their assets and deniable operators can easily start chaos, divide nations, and subvert governments - Europe is not immune. Nope, it is not conjecture - these methods have been well documented about the CIA and NSA for at least 40 yrs.

Going back to the topic, it is looking great for PMs, and I dare say we have great spread betting opportunities coming up on the 8th and 20th. 

Tue, 09/06/2011 - 08:33 | Link to Comment Quinvarius
Quinvarius's picture

So cheeseburgers in Geneva are only going to be $15.75 now?

Tue, 09/06/2011 - 08:35 | Link to Comment ArkansasAngie
ArkansasAngie's picture

In case of CURRENCY issue pull lever "J"

Unemployment Issue pull lever “B”

GDP = “W”

Inflation = “A”

Gee … which lever do you pull for sovereign insolvency?  Was it “Z” or “nth”?  Too many people pulling too many levers … at the same time.

 

Tue, 09/06/2011 - 08:52 | Link to Comment Zero Debt
Zero Debt's picture

Uncle Ben just called and said he wanted you to return his Print-O-Matic Mini and his soap bubble kit immediately

Tue, 09/06/2011 - 08:39 | Link to Comment Dain Bramage
Dain Bramage's picture

It mades me sad...not the forex move but the fact that the Swiss have rolled over and joined the dark side.

Tue, 09/06/2011 - 08:39 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Is willing to buy unlimited amounts of foreign currency to support the move.

When a bank, especially a staid bank such as the SNB makes statements like this, it's game up. Definitely in injury time now.

Also goes to show how many arrows CBs have in their quiver to make gold bugs, well, quiver.

As they say, it ain't over till it is. or as I say it, it's not the end of the world till it IS the end of the world and then it does not matter anyways.

V

http://aadivaahan.wordpress.com/2011/09/05/water-branding-and-thoughts/

Tue, 09/06/2011 - 09:00 | Link to Comment Iam Rich
Iam Rich's picture

Not sure why gold holders are quivering this morning except with something approaching orgasmic delight.  Not sure how printing of the "safe haven" CHF makes it a safer haven.  Maybe I missed something?

Tue, 09/06/2011 - 09:13 | Link to Comment ManufacturedOpinion
ManufacturedOpinion's picture

That is a lame article by Oh Regional Indian.

I suggest y'all just skip over the spam.

Tue, 09/06/2011 - 09:42 | Link to Comment Iam Rich
Iam Rich's picture

Damn MO...I got trolled!  I had no idea what ORI was getting at.

Tue, 09/06/2011 - 09:43 | Link to Comment Motley Fool
Motley Fool's picture

Any swiss physical gold holders quivering? I'm curious. :P

Tue, 09/06/2011 - 12:27 | Link to Comment Ghordius
Ghordius's picture

This morning I was quite untypically half in Swissies and half in Gold.

Don't know if to cry or to laugh or both.

Tue, 09/06/2011 - 08:43 | Link to Comment virgilcaine
virgilcaine's picture

Too little too late, the Bernank has already sunk them with the weak USD.  Mission accomplished, EU in ruins. In the worl of CB,s the crziest sob wins..only to lose to pms. eventually.

Tue, 09/06/2011 - 08:42 | Link to Comment Tao 4 the Show
Tao 4 the Show's picture

CHF loses significant chunk of safe haven status, now relegated to more of a fiat relative haven. This should signal increased flows into gold, the only currency without a central bank.

Tue, 09/06/2011 - 08:46 | Link to Comment mess nonster
mess nonster's picture

The Swiss feel the pressure, and cave in- why not dump the franc, and use the Euro? Same diff. It tells me Germany ain't goin' anywhere. The euro is here to stay, mortally wounded or not. QE to absorb all the damage, gold will be over 2000, and headed for 2100 by Friday.

Tue, 09/06/2011 - 08:49 | Link to Comment Atlantis Consigliore
Atlantis Consigliore's picture

this signpost ahead;   Swiss is Kaput

Euro is Kaput

the faster we get DM back with a strong central bank and let the 

PIGS get eaten,  and let them devalue;

 

you think Greece is going to go to austerity when they can do the 

Drachma dance and devalue.

 

a sure as a thing as making sure Buffets Wachovia/ Wells Fargo

not int the FHFA mortgage lawsuit,....LOL......

 

goodbye UBS,  and the NY  FAB 4,  goodbye all broken up per Bove.

 

 

Tue, 09/06/2011 - 09:02 | Link to Comment Iam Rich
Iam Rich's picture

Saw the CHF this morning when I flipped on finviz and knew this must be the case.  First word that came to mind....retarded.  Second word, yep...gold.  Let me use them in a sentence now...It's retarded that gold is down this morning on the CHF news.

Edit....It's retarded that silver's down a buck.  Oh wait....it's Tuesday and its 3a EST, of course its down a buck.  Let's let it breathe for a day.

Tue, 09/06/2011 - 10:23 | Link to Comment Smiddywesson
Smiddywesson's picture

Bad news, market up.

Good news, market up.

Why should gold or silver be any more logical on a day to day basis?

TPTB are digging in at $2000, but they are facing a more determined enemy after they gave up their $200 drop in gold prices in less than two weeks.  They are in trouble and they know it.  All they can do is use up yet another margin hike. 

 

Tue, 09/06/2011 - 09:03 | Link to Comment Smiddywesson
Smiddywesson's picture

Another lifeboat slips beneath the waves.  What will happen to gold prices when everyone crowds into the sole remaining lifeboat, into gold?  Virtually unlimited demand, combined with limited supply, combined with rampant fear, sprinkle in a return to true value after decades of price suppression, and add just a dash of price manipulation UPWARDS once central banks want high gold prices.  Voila!  A desert fit for a king. 

I'm still buying silver too, but I don't expect to be wowed by silver prices until the kick the can game comes to an end.  Silver's day is coming. 

Tue, 09/06/2011 - 09:05 | Link to Comment Everybodys All ...
Everybodys All American's picture

That is going to leave some hedge funds under water.

Tue, 09/06/2011 - 09:10 | Link to Comment swiss chick
swiss chick's picture

So now we are screwed, like everyone else!!!!!

Tue, 09/06/2011 - 09:32 | Link to Comment DosZap
DosZap's picture

swiss chick,@09:10

YES, you have now been officially LAID............................to REST.

Tue, 09/06/2011 - 09:23 | Link to Comment chindit13
chindit13's picture

Already famous for their chocolates, now the head of the SNB truly has become the Candyman. Not the Candyman of the Grateful Dead, not the Candyman of the bawdy Delta Blues ditty, not even the Candyman of Christina Aquilera. This is the Sammy Davis, Jr. Candyman.

Oh, who can take tomorrow, dip it in a dream

Separate the sorrow and collect up all the cream

The Candy Man, oh the Candy Man can

Yes, all because of this SNB move, Greeks will suddenly work longer hours, embrace austerity, and reward those brave enough to buy that 81% one-year Pap Pap Pap Pap paper. Irish eyes will smile again. Berlusconi will learn to love not only 17 year ingénues, but his own country as well. US firms will suck up all that unused labor wafting about the country, and the residential ATM will be in vogue again. Sometimes solutions are just so simple, if only you dare believe.

Tue, 09/06/2011 - 09:17 | Link to Comment jekyll island
jekyll island's picture

Well that about does it for the FRN$...

Swiss franc declines to accept position as safe haven currency, leaving only precious metals standing.  In a related note, in a CNBC (why do I still watch that channel?) interview, Dennis Gartman announced the US dollar as the only safe haven currency left, despite the US debt being downgraded by the S&P. 

My most sensitive indicator has triggered, a vote of confidence in the dollar by Gartman.  I was hoping this day would never come.  Run for the hills with your gold and guns.   Don't get hurt shorting the dollar or US treasuries, to many sheeple who are ignorant of the fiat risk will screw that up before they get wiped out. 

Tue, 09/06/2011 - 10:27 | Link to Comment Smiddywesson
Smiddywesson's picture

Don't get hurt shorting the dollar or US treasuries, to many sheeple who are ignorant of the fiat risk will screw that up before they get wiped out. 

My feelings exactly.  Just because the elephant is mortally wounded doesn't mean he can't kill you.  Aside from PMs and perhaps day trading, any participation in markets that are this manipulated is an invitation to disaster.

Tue, 09/06/2011 - 10:32 | Link to Comment Steve Evets
Steve Evets's picture

Would that be Dennis 'Gold was the bubble of our lifetime' Gartman?

Tue, 09/06/2011 - 09:19 | Link to Comment jekyll island
jekyll island's picture

Sorry for the inconvenience

Tue, 09/06/2011 - 09:41 | Link to Comment DosZap
DosZap's picture

Well, Gold just went GREEN......................wait till everyone figures out what this means.

Everyone is now officialy in the crapper...........

Altogether now..................1-2-3..........FLUSH!!!!!!!!!!!!!!

Tue, 09/06/2011 - 10:08 | Link to Comment Sizzurp
Sizzurp's picture

All these central bankers are inadvertently herding people into the only real money...gold.  I suppose they will have a nice statist solution for that next.

Tue, 09/06/2011 - 12:38 | Link to Comment Ghordius
Ghordius's picture

Eh?

"inadvertently herding people into the only real money...gold" ??

Have you any idea since how long this was the "fallback solution" ?? You were probably not even born when gold was discussed/supposed to play a new/fallback role in the life of the Central Banks.

You guys have a distorted idea of what a Central Bank is and isn't because you are all too much in the shadow of the FED.

The FED is special because of it's triple role of  

1. CB of the USA

2. CB of the extra-american Dollar - aka Global Reserve Currency

3. Handmaiden of the TBTF bank cartel

Tue, 09/06/2011 - 10:29 | Link to Comment Jimmy Carter wa...
Jimmy Carter was right's picture

C'mon guys look at it diff'rently.  The CHF was too high, they dropped it down a notch or 7 to help out their mother tongue friends.  It was going to drop anyway, but not before hitting an embarrassing high.  So they saved the Euro and the USD some embarressment.

Tue, 09/06/2011 - 10:30 | Link to Comment SilverRhino
SilverRhino's picture

Curious, with a 100:1 leveraged FOREX account and a million in base capital.  How much could someone betting on the EURCHF or USDCHF rising make if they caught wind of this SNB move ahead of the time?

Tue, 09/06/2011 - 10:39 | Link to Comment greek 83
greek 83's picture

I don't get the problem,even devalued euros have more value that the thin air Switzerland will use to buy them.Maybe at the end they will suffer a few billion losses but they can easily print such a miniscule amount.At this point i don't think there is much to lose,just try everything or in other words print like everyone it's not like franc is gonna go down compared to other currencies.

Tue, 09/06/2011 - 11:17 | Link to Comment Overflow-admin
Overflow-admin's picture

I AM a (small) bank run.

Tue, 09/06/2011 - 16:28 | Link to Comment Caveman93
Caveman93's picture

This just reassured me that getting out of all paper was smart.

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