Swiss move to halt franc rise to boost gold over long run: analysts
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — Gold futures traded lower Wednesday, extending a retreat as global equity markets scored gains to deprive the yellow metal of its safe-haven appeal.
December gold futures GC1Z -1.39% fell $26.10 to trade at $1,847.20 an ounce in electronic trade.
Asian and European equities posted strong gains, while U.S. stock futures pointed to a positive open on Wall Street. Gold futures notched an intraday record of $1,923.10 an ounce on Tuesday, but ended lower after a feared rout in U.S. equities didn’t materialize.
But strategists said the decision by the Swiss National Bank on Tuesday to cap the value of the Swiss franc EURCHF -0.03% versus the euro is a long-term positive for gold. The SNB vowed to buy “unlimited quantities” of foreign currencies, if necessary, to ensure the euro doesn’t dip below CHF1.20.
The decision effectively robs traders of a long-favored safe haven, which will further stoke the attractiveness of gold and other perceived havens during market turmoil.
Strategists at Barclays Capital said the move by Switzerland is unlikely to quell global market turmoil, because the Swiss economy is too small to have a significant impact on the key problems facing global asset markets — the euro-zone crisis and weakening global growth.
“What it does do is to reduce the number of ‘safe-haven’ assets: Admittedly, only by one, but they have become increasingly scarce. The measure therefore adds to the attractiveness of the U.S. dollar, the Japanese yen and gold, in our opinion,” the strategists said in a note.
William L. Watts is a reporter for MarketWatch in Frankfurt.
