Gold Before the Sharp Rise
Geneva-Switzerland (Jan 16) SNB Actions & Oil Prices Drive Gold Demand. As everyone also heard yesterday, the Swiss central bank decided to take dramatic action to stop the minimum exchange rate of franc to the euro at 1.2 and they lowered interest rates to a negative return of -0.75% . As a result of this decision the US government bond yields declined significantly, by about 10 basis points. US markets ended another day in decline and oil continues to fall.
Precious Metals=Safe Havens
In this economic environment, in which the cumulative signs of uncertainty are present in the markets, investors turn to safe havens, specifically toward Gold. This is why we see increased demand for gold over the past two weeks. Breaking the level of $ 240 marks a significant bullish event, especially if gold prices close near the current week high.
After a period of significant declines in the value of gold, the price action raises the likelihood of significant new highs in gold when the initial target area is around $ 1,320. The increase in certainty provided significant capital flow towards Gold and as it looks now the move will have staying power.