Gold Continues Rally After SNB Shock Decision

Gold futures headed for the longest rally in more than six months as Switzerland’s decision to decouple its currency from the euro roiled currency markets, boosting demand for the metal as a haven.

The Swiss National Bank unexpectedly scrapped its three-year policy of capping the Swiss franc against the euro, one week before European policy makers meet to discuss new stimulus. The Bloomberg Dollar Spot Index fell against a basket of 10 currencies, fueling demand for bullion as an alternative asset.

Gold has risen more than 6 percent this year as signs of deflation and slowing global economic growth spur speculation that the Federal Reserve will be slow to raise U.S. interest rates. Demand for the metal will rebound in 2015 after two straight annual declines as consumption in Asia rises and investors return to exchange-traded products backed by bullion, according to HSBC Securities (USA) Inc.

“The Swiss National Bank’s decision caught the market a little off footing, and gold gained as a safe-haven buy,” Frank McGhee, the head dealer at Alliance Financial LLC in Chicago, said in a telephone interview. “The Swiss are giving up on the euro at the end of a long and painful run.”

Gold futures for February delivery surged 2.1 percent to $1,260.30 an ounce at 10:24 a.m. on the Comex in New York, after touching $1,264.60, the highest since Sept. 8. Prices headed for a fifth straight gain, the longest rally since June 25.

The metal climbed above its 200-day price average for the first time since September.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza