Gold goes on a tear as Swiss National Bank shocks market, dollar slides
Madrid-Spain (Jan 15) A shocking move from the Swiss National Bank sent the dollar reeling and gold prices flying higher on Thursday.
In mid-morning European trading hours, Switzerland’s central bank scrapped its long-standing floor against the euro, which sent the Swiss franc EURCHF, -12.18% soaring 14% against the euro and the dollar USDCHF, -10.90% The central bank also cut its interest rate on sight deposits to a negative 0.75%.
When the dollar falls, gold prices tend to push higher. Gold GCG5, +1.82% for February delivery surged $17.70, or 1.4%, to $1,252.30 an ounce. March silver SIH5, +0.34% rose 13 cents, or 0.8%, to $17.12 an ounce.
“Negative interest rates should be positive for gold. According to the SNB press release, the decision to lower interest rates sizably was made to avoid unintentional tightening of monetary conditions following the removal of the exchange-rate floor,” said UBS analysts Edel Tully and Joni Teves in a note.
“The broken floor should be bullish for gold though, in general. It is likely it will test $1,245 resistance again today,” said Petko Bankoff, a private trader based in Veliko Turnovo, Bulgaria.
Copper gets a break: Copper prices on Thursday caught a bounce from the prior session’s thrashing. High-grade copper for March delivery HGH5, +2.37% added 5 cents, or 1.8%, to $2.550 a pound, rebounding slightly after touching levels not seen since mid-2009. Concerns over a supply glut and slowing consumption in China have weighed on copper prices in recent months.
Eugen Weinberg of Commerzbank had a hard time wrapping his brain around the decline, though he believes any weakness will be short-lived.
“There has been no news about the copper market which might have explained the slump,” he explained. “We, meanwhile, believe that it is clearly exaggerated and see no fundamental justification for the low price. Once prices bottom out, the countermovement could therefore be pronounced.”
See also: Why copper’s rout may be a red flag for investors
On the economic front, a trio of reports hits 8:30 a.m. Eastern Time: initial weekly unemployment claims, the producer-price index and the NY Fed’s Empire State manufacturing survey. Then, at 10:00 a.m. Eastern, investors will get a look at the Philly Fed manufacturing survey for January. Read: First clues for U.S. economy in 2015 on tap.
March palladium PAH5, -0.38% rose $4.10, or 0.5%, to $784.75 an ounce, while April platinum PLJ5, +0.00% platinum gained $10.60, or 0.9%, to $1,249 an ounce.
Source: MarketWatch
