LONDON (Reuters) - 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 on track 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 percent against the dollar and by more than 8.5 percent against the euro. Gold priced in the Swiss currency rose by more than 7 percent, and was set for its biggest daily gain since mid-September 2008, when the global credit crunch intensified, prompting the U.S. Federal Reserve to halve rates to 1.0 percent.
Spot gold was last quoted down 0.6 percent at $1,891.60 an ounce 6:44 a.m. EDT, 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 U.S. 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-percent rally so far this year, fueled largely by the impact on the currency markets from investor concern over the damage to the U.S. 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 U.S. economy is coming into greater doubt after last week's employment report showed zero growth in the number of jobs created in August. Continued...
