The world will be watching the Merkel and Sarkozy economic policy meeting today to bolster the situation in the Eurozone. Meanwhile, Swiss rumors continue to monopolize the severe franc over-devaluation. Whether to peg the franc against the Euro, now nixed by the SNB (Swiss National Bank), the lame decision reached on new measures and no pegging, did little to change anything. The Swiss franc went up like crazy in the past year as investors ran for its safety. Then, as it ballooned, it sent the country’s currency spiraling.
As speculators rushed to buy the franc in the International trade for the last 12 months, the franc appreciated 30%, which created a pandemonium for the little country tucked away in the Alps. When they tried to regain balance and sell the franc, which became ineffective, rumor spread to peg the franc against the Euro. Currency experts at JP Morgan Chase quickly pointed out, that pegging the currency to the Euro would have had severe negative implications on the SNB’s balance sheet, which would lead to major problems in the economy.
Safe haven seekers, who once thought the franc was the best and only option to hide their monies under the tutelage of the Swiss franc, are forced to realize, the franc is no longer as safe as they thought. Short and long time spectators are pulling out of the franc and turning to gold . The yellow metal is taking advantage of the indecisive franc moving up according to Kitko $1,782.90 this morning.
On the same rollercoaster theory, while George Soros is focusing on China and Germany ultimately forced to back up the struggling-lame Euro whether they like it or not, the Swiss is struggling to figure out what to do with their strong overblown franc. It’s interesting to note this, because it is an important clue as to the future direction of the Euro itself. No matter of new measure, the Swiss can’t adjust quickly enough how to deal with the huge gain on the franc. Neither Euro nor franc can reverse quickly enough and the German industrial powerbase could take full advantage both.
The latest idea of trying to inject liquidity into the market to debase the franc, the SNB would remain purchasing outstanding SNB bills in attempt to decrease its value. But damage has been done to the franc. The consensus is, the SNB’s most recent moves are pretty meaningless. “We think that today’s decision is an important indication that the SNB is still reluctant to intervene on the FX spot market and that investors expecting such measures in the near term could be disappointed”, said Citi analyst, Valentin Marinov. The good news out of this mess, by lowering the market interest in SNB’s measure, it will have a great advantage for gold.
Either way budget discipline is the answer to deal with money problems yo-yoing between global indecisiveness. But unfortunately there’s not a big enough band-aide to heal the huge world economic currency mess. Currency deterioration continues with only one option left–gold. Especially now for those who have Swiss Franc. All in all, every economic crisis on the table, whether it’s the Euro the franc or the dollar, they all are heading toward a dead end street. Monies will eventually have less and less place to go, which all point to the safe haven of gold . “There are so many reasons to own gold today. Where will those long term seekers of a safe haven go, now that it isn’t so safe? Gold is in a beautiful, clear and undeniable secular uptrend. Easy to see and hard to dispute unless one still prefers paper”, says Regal Asset Team of Analyst.