If the Gold fall was real, why is the Swiss Franc stable?

As from Monday the Gold has lost $60 per troy ounce or about 3,7% of its value. Measured in Euro the loss is smaller as one of the main reasons of the decline at Gold is strengthening the dollar. Some analysts has already started to talk about the "gold bubble burst". But let us be honest. A gold bubble has never existed. There is just a bubble of newly printed paper-money. In fact the gold price rise even lags the increase in global money supply. Of course there will always be manipulations especially having in mind that the most of the trade is with "paper-gold", while the real gold market is something much different. Manipulations can not last long, as the market always wins. But it is normal to manipulate. In all inflation times the government tried to manipulate the gold. In 1933 in USA they even confiscated the gold.

But I have something more interesting to say. What is happening with the Swiss Franc? This currency is often called "liquid gold" due to its statute of an extreme safe haven. In past months the Swiss Franc lost some of its authority due to political interventions in favor of Swiss exporters. But anyway it continues to be a safe haven and much capitals are poured in Switzerland - frightened by the worsening crisis. So now the Franc is almost a fixed to Euro currency - from one side SNB established a ceiling, and from the other - the market is pressing to the ceiling. So the Franc is de facto fixed at 1,20 Francs per Euro.

When the Gold started to fall since Monday it would be logical the Swiss Franc also to start falling. SNB established only a ceiling but will not intervene in a case of devaluation. So if the Gold decline was inspired by real market fundaments (for instance - deflation expectations) so these factors should influence the Franc too. The same that has been told for the gold was also told for the Franc - it is over valuated, bubbled and will fall.

But while we see a decline in Gold, we don't see such a decline in Swiss Franc. It is fixed to the Euro at 1,20 and no chance of 1,21 or 1,22. Therefore there is no fundamental factors like real deflation expectations, bursting a bubble or changing the trend. Therefore I think, we are seeing just a market manipulation against Gold that will exhaust with time.

May 9th 2012

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