Gold Closes Above $1,300 After ECB Announces Stimulus

Gold futures settled above $1,300 an ounce for the first time since August after the European Central Bank expanded stimulus measures, boosting demand for the metal as a store of value.

ECB President Mario Draghi said the bank will buy 60 billion euros a month of assets through September 2016. The Executive Board earlier proposed buying 50 billion euros ($58 billion) of bonds a month through December 2016, according to two euro-area central-bank officials.|

Bullion is up almost 10 percent this year as stagnating economies challenge policy makers to generate new ways to buoy growth. The euro fell to an 11-year low against the dollar as the European Central Bank expanded its bond-buying program to include government bonds, boosting demand for gold as an alternative to currencies that are being revalued.

“The size of the package was a positive surprise for the gold market, and we are seeing an increase in safe-haven buying after the plunge in the euro,” David Meger, the director of metal trading at HighRidge Futures LLC in Chicago, said in a telephone interview. “Gold will continue to get bid in this low-interest environment.”

Gold futures for February delivery rose 0.5 percent to settle at $1,300.70 an ounce at 1:42 p.m. on the Comex in New York. Aggregate trading was 51 percent more than the 100-day average, according to data compiled by Bloomberg.

Bullion priced in euros jumped to the highest since April 2013, extending the year’s advance to 17 percent.

After shunning gold for two years, investors are returning to the metal amid concern that U.S. growth won’t be enough to offset weakness in foreign economies.

“There is a ton of uncertainty, and the ECB’s decision underscores that,” John Stephenson, chief executive officer at Stephenson & Co. Capital Management in Toronto, said in a telephone interview.

On the New York Mercantile Exchange, palladium futures for March delivery rose 0.5 percent to $772.30 an ounce. Platinum futures for April delivery rose 0.7 percent to $1,284.80 an ounce.

China and Switzerland to launch yuan trading in Zurich

The central banks of China and Switzerland are planning to establish a yuan trading center in Zurich. The deal is expected to increase the number of European transactions in yuan.

The agreement will be signed during the visit of Chinese Prime Minister Li Keqiang to the World Economic Forum in Davos, Xinhua news agency reports.

“A memorandum of understanding will be signed between the central banks of the two countries during Chinese Premier Li Keqiang’s visit to Switzerland. It is an important step in the internationalization of the yuan, especially in Europe,” said a government official.

According to the agreement, Switzerland will receive a quota of about $8 billion (50 billion Yuan).

This step comes under the framework of the QFII (Qualified Foreign Institutional Investor) program that allows foreign investment in Chinese securities using foreign currencies. Similar centers already exist in Hong Kong and London.

In July 2014, the central banks of China and Switzerland signed an agreement on a $24 billion (150 billion yuan) currency swap to boost bilateral trade and economic relations.

China, the world’s second largest economy, has been pushing the yuan as a rival to the dollar in the global financial system since 2010. In November 2014, the Bank of China started to operate European yuan clearing in Frankfurt.

The Chinese yuan is traded directly against the dollar, euro, the Japanese yen and Russian ruble among other currencies. Settlement worldwide in yuan reached $485 billion (3.01 trillion yuan) in 2013 compared to $330 billion (2.06 trillion yuan) in 2012.

Global Shockwaves To Come From Swiss Currency Bombshell - Mike Maloney

SWISS NATIONAL BANK (SNB) CHECKMATE!!!

So the drama with the Swiss Franc and the Euro is upon us.
What I would really like to highlight, is that the way things went down, isn't the way the Swiss or the currencey markets thought they would.

The referendum (about gold) that wasn't passed, was an attempt to enforce a 20% gold position on the SNB. The current position is about 8%.

The reason the vote wasn't implemented, was that pegging the Swiss Franc to gold, would make it impossible for the SNB to remain competitive in the current currency war, and it was argued that the ability to issue more money, would give the SNB the flexibility to absorb fluctuations in the currency markets and to stabilise the Swiss economy, which is largely dependant on the Euro-zone by implementing a fixed rate (1.20).

The fact that the vote was rejected, hasn't meant that the SNB was unable to follow what the referendum initially tried to achieve. Which is the point of this post.

By removing the 1.20 peg, the SNB in effect moved the Swiss Franc vs. Dollar price up by 25-30%, and the price of gold surged as well, due to sentiment.

Basically, the SNB not only pushed the price of gold up, but the purchasing power of the Franc means that more gold can be bought, for the same amount of Swiss Francs.

My point is basically that it didn't need a referendum about gold to ensure that the Swiss Franc's position as a reliable/valuable world currency would be maintained.

Switzerland Loses Currency War - Swiss Win