Swiss franc shock resurrects gold-euro divergence
London (Jan 16) Investors are finding solace in gold as the Swiss central bank sends the euro reeling, affirming the metal's status as a safe haven while the single currency increasingly becomes a source of anxiety rather than stability as envisioned by its creators.
When the euro was launched around 15 years ago, its creators thought it would eventually be an investor safe haven. But for the past five years, the opposite has been the case. On Friday, gold rose to its highest in four months after Switzerland dismantled a three-year cap on the franc and dealt a fresh blow to the euro.
After the 2008 financial crisis, gold climbed almost as high as $2,000 per ounce while the euro steadily declined from record highs against the dollar. The gap between the two then narrowed sharply when European markets calmed down in 2013 and in early 2014.
Now the divergence is returning as bigger euro members like Germany openly fret about a "Grexit" on fears that a Greek election later in January will produce a government willing to default on the country's debt.
"Fresh fears of a Greek exit from the euro zone or considerable shake-up in the status quo have driven safe-haven demand into gold," ANZ said in a research note on Friday.