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

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

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

Gold falls from record after Swiss peg franc

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

Gold surges to record on euro zone woes

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

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

(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

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

Why Any Euro Exit Would Cause 'Complete Chaos'

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thedrickster's picture

Race to the bottom bitchez.

yakmerchant's picture

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

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.

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. 

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.

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.    

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).

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

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 a central bank.

trav7777's picture

yeah...a gigantic move, huge intervention.

PIIGS and E Euro debt fallout must be crushing them

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.

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.

trav7777's picture

exports?, 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.

Howard_Beale's picture

CHF - It's what's for dinner.

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...

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!

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.

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

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.

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.

pods's picture

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


tmosley's picture

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

This is fundamental for understanding what is to come.

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.  


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).


FeralSerf's picture

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

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.

trader1's picture


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


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.

GoldMeUp's picture


godzila's picture

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

trav7777's picture

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

cossack55's picture

Seen any Japanese looking financial types hanging around Zurich lately?

Dr Zaius's picture

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

Id fight Gandhi's picture

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

They say they're worried about deflation.

Minoan's picture

Bringing a Swiss Army Knife to a gold-digging

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.

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."

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.

Howard_Beale's picture

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

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.

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..

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.

cossack55's picture

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

Pretorian's picture


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!


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

theMAXILOPEZpsycho's picture

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