Gold remained firm in European session with the benchmark Comex contract hovering around 1750. Given the turmoil in the Eurozone, Swiss franc has once again become a safe haven. Speculations have fueled that the SNB may resume intervention as the franc has risen against both the US dollar and the Euro in recent day. From the lesson in September last year, the fall in Swiss franc would trigger selloff in gold. While history may repeat should the SNB intervene in coming days, this should only be temporary. Given the reaction of the gold price to the January FOMC statement, the precious metal should glitter in the low-rate environment.

The SNB stated in September and reiterated in December that it would 'continue to enforce the minimum exchange rate of CHF 1.20 per euro with the utmost determination'. With the EURCHF falling to the lowest since September 19 as sovereign debt problems failed to show much progress, speculations have sparked that the SNB would intervene the FX market soon. The last time the central bank entered the market was in September 2011. On the same day, gold peaked at 1923.7, probably suggesting that SNB's intervention had suffocated safe-haven trades despite dismal macroeconomic outlooks. Gold's sharp correction since then has been driven by factors such as strength in the US dollar, CME's margin requirement and the Fed's implementation of operation twist instead of QE3.

In our opinion, any correction of gold resulting from SNB's intervention should be temporary. Indeed, the magnitude of decline should be less severe than last year. The critical point is Fed's monetary stance. In 3Q11, the Fed disappointed the market by introducing operation twist instead of QE3. The lack of liquidity provision triggered a round of selloff in gold. However, in January, the Fed delayed the date of first rate hike to at least late-2014 and signaled the possibility of QE3. This has lifted gold and supported its rise thereafter.

On the dataflow, a number of releases will be related to the US job market. Initial jobless claims probably fell -2K to 375K in the week ended January 28. Challenger will also report its estimates on the percentage of job cuts in January. These will probably give some guidance on the non-farm payroll report due on Friday. Currently, the market anticipated the US would have added +150K new positions in January, down from +200K a month ago. The jobless rate would have stayed at 8.5% in January.