LONDON: Gold fell from record highs on Tuesday, after Switzerland's decision to peg its currency to the euro shook financial markets and battered the franc, putting the price of bullion in Swiss francs for its largest daily gain in three years. The Swiss National Bank said on Tuesday it would set a minimum exchange rate target of 1.20 francs to the euro and would enforce it by buying foreign currency in unlimited quantities. The Swiss franc tumbled by more than 7 per cent against the dollar and by more than 8.5 per cent against the euro, while gold priced in the currency rose by more than 7 per cent, and was set for its biggest daily gain since mid-September 2008, when the global credit crunch intensified, prompting the US Federal Reserve to halve rates to 1.0 per cent. Spot gold was last quoted down 0.5 per cent at 0918 GMT, having risen earlier to a record $1,920.30 an ounce. "Particularly for investors with proportional assets in Swiss francs, this will strengthen the appeal of gold relative to the Swiss currency. It has to be seen as bullish certainly from the private bank side of the gold market," said Credit Suisse analyst Tom Kendall. "We've seen US Treasuries have their reputation as 'risk-free assets' damaged. Now we've got the Swiss franc subject to substantial and ongoing intervention by the SNB and so yes, it does strengthen gold's claim as a safe-haven." Gold's 34-per cent rally so far this year, fuelled largely by the impact on the currency markets from investor concern over the damage to the US and euro zone economies from their vast debt burdens, is the largest yearly gain since 1979. Market players are increasingly unconvinced of European leaders' ability to tackle the regional debt crisis and prevent it spreading, while the resilience of the US economy is coming into greater doubt after last week's employment report showed zero growth in the number of jobs created in August. In the money markets, some indicators of funding stress are back at levels last seen in 2008, when the global credit crunch unfolded, pushing up interbank lending rates to the point where credit markets were frozen and central banks pumped trillions of dollars into the financial system. FLIGHT TO SAFETY Traditional safe-havens such as government bonds, gold and the Swiss franc itself usually benefit in times of financial or economic uncertainty.

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