Futures & Commodities

Swiss shock no 'game changer' for gold?

Here's what the SNB move means for gold
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Here's what the SNB move means for gold

Gold traded near its highest level in four months on Friday, and despite a slight dip on the day, the precious metal was close to logging its best week of trade in ten months.

Spot gold closed 2.57 percent higher on Thursday, reaching $1,261 an ounce - a level not seen since early September – after the Swiss National Bank (SNB) rocked markets by scrapping its currency peg against the euro.

In contrast, gold lost 13 percent against the Swiss franc during Thursday's session, as the currency surged higher.

But commodity analysts were not necessarily excited, with Joni Teves, precious metals analyst at UBS, telling CNBC Friday that it was too early to tell whether the central bank's move was a "game changer" for gold.

Teves said the market volatility the move caused was a positive for gold—which is often viewed as "safe-haven" asset—as was the SNB's cutting of interest rates into deeper negative territory.


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But on the negative side, she said that the momentum for the Swiss franc—which surged 30 percent against the dollar on the SNB's move–created competition between the Swiss franc and gold as a "safe haven." "Safe haven" assets are those to which investors flock at times of "risk-off" market sentiment.

"Ultimately it's up to the investor, and what the risk appetite is, and what their preference is. But generally, if you think about yesterday's action creates safe haven demand across the board, so on that basis it should be positive." Teves stressed.

Peter Boockvar, the chief market analyst at economic advisory firm The Lindsey Group, grew bullish after the SNB move, saying that in an environment of severe volatility for currencies, gold would be the "last man standing."

"The gold bear market is over and will go substantially higher from here in the coming years," he said in a note on Thursday.

Carsten Menke, a commodities research analyst at Julius Baer, agreed that market volatility would support gold for the short term. He said that action from the European Central Bank next week and Greek parliamentary elections would also provide a fillip for gold.

Menke was bearish on the long-term outlook for gold however.

"Looking beyond the short-term, we maintain our longer-term bearish view, as the progressing economic recovery should continue to weigh on safe-haven demand for gold," he said in a note on Friday morning.