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« How Silver Coins are Minted | Main | Silly Reasons Not To Invest In Gold »

Swiss Franc to be managed: Where have we heard that before?

King Canute 07 sep 2011.JPG
King Canute

FRANKFURT (MarketWatch) — The Swiss franc plunged dramatically versus the euro and other major rivals Tuesday after the Swiss National Bank took the extraordinary step of setting a floor for the euro/Swiss franc exchange rate at 1.20 francs and vowed to buy “unlimited quantities” of euros to defend it


In a breakneck swing, the euro EURCHF +0.00%  traded at 1.2033 francs, up from around 1.12 francs ahead of the announcement, a rise of 8.9%, as traders stampeded out of short euro/Swiss franc bets. Other currencies also rose versus the franc, with the U.S. dollarUSDCHF +0.07%  jumping 8% to trade at 84.85 centimes. There are 100 centimes in a franc.

Swiss equities, which have been hurt by fears a strong franc undercutting Swiss exports, also jumped. The Swiss Market Index CH:SMI +4.36%  rallied 4.4% to 5,367.24, with offshore drilling firm Transocean Ltd. RIG +0.01%   CH:RIGN +12.01%  up 12% and drug firm Novartis AG CH:NOVN +6.30%   NVS -0.65%  up 6.8%.

“With immediate effect, [the SNB] will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities,” the SNB said.
But analysts said the SNB’s toughest battle lies ahead, particularly if ongoing tensions in the euro zone continue to stoke investor appetite for safe havens.

“This is an endurance contest whereby the SNB needs to fight hard against a market that could soon test its resolve,” said Paul Mackel, currency strategist at HSBC in Hong Kong. “Putting EUR-CHF at 1.20 today is the easy part. Keeping it there or significantly above will be difficult if the world still looks like a gloomy place.”

The SNB had previously moved to boost franc liquidity and taken other steps in an effort to arrest the rise of the franc amid fears over the toll of a strong currency on the nation’s economy. Tuesday’s salvo was its strongest statement yet.

The European Central Bank, in a statement, said its Governing Council had been informed of the decision by the SNB and said the Swiss central bank made the move “under its own responsibility.”

The Swiss franc, long a favorite safe-haven currency, has seen massive inflows as worries over the euro-zone debt crisis and the global economic recovery have mounted.

The central bank said the “massive overvaluation” of the franc poses an “acute threat to the Swiss economy” and carries the risk of deflation, prompting the SNB to seek a “substantial and sustained weakening of the Swiss franc.”

The SNB said that even at 1.20 francs per euro, the Swiss currency remains high and should continue to weaken over time, warning that it is prepared to take other measures if required by the economic outlook and deflationary risks.

Intervention could be costly

The move by the SNB puts the central bank in direct conflict with a strong desire by market participants to buy safe-haven assets, said Jane Foley, senior currency strategist at Rabobank in London.

“In the very probable event that the euro-zone crisis worsens in the coming months, intervention could be very costly for the SNB,” she said in emailed comments.

Sharp losses in a previous round of intervention in 2009 and 2010 to hold down the franc versus the euro had provoked sharp criticism of the SNB in Switzerland. But the franc’s renewed rise has underlined economic fears, building support for more aggressive efforts to rein in the currency.

To read this article in full please click here.


As we see it, this might be harder to achieve than the Swiss bankers have imagined. The world is rolling in turmoil everywhere we look and the move to both gold and silver as a safe haven is testament to the nervousness of the people. With both the United States and the Eurozone looking like the walking dead the hunt is on for security and the Swiss Franc is one of those bolt holes. It will be interesting to observe as they try and stop the tide of money coming in, after all King Canute failed.

It also raises the question of why would you want to place your hard earned cash into an asset controlled by people who’s stated aim to stop it from going higher!

This can only be good news for all us silver bugs, expect a sparkling fourth quarter with a stunning move to the upside albeit on golds coat tail and a stampede by the shorters to cover their positions.

Regarding We currently have six trades open, one of which is up 5.15 timeswhat we paid for them , however, we do not update the charts until the trade is closed and the cash is back in our account.

For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and also with eOptiontherefore auto trading is now available for SK OptionTrader signals

Our model portfolio is up 396.58% since inception

An annualized return of 119.04%%

Average return per trade of 42.21%

85 closed trades, 82 closed at a profit

Average trade open for 45.41 days

sk chart return on SK OptionTrader Model Port 22 aug 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

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Reader Comments (8)

Yeah, that'll work.

"Before God made idiots, he made central bankers for practice." - James Dines

King Canute indeed.

Gee, that leaves what virtually alone as a safe haven money holding?

Anyone? Anyone?

September 7, 2011 | Unregistered Commenterfallingman

You know, I haven't heard from Di in a long, long time.

Maybe his/her prediction of a correction in gold and silver correction were incorrectly dated ... or maybe they just won't happen at all, in our current society's existence.

Maybe I should have kept my 'keyboard' shut, you know - let sleeping dogs lye.

Always look forward to hearing from fallingman and snakeman ... you guys make my day.

GLTA ...

September 7, 2011 | Unregistered CommenterTJ

mine to!

September 7, 2011 | Unregistered CommenterSilver Prices

Thanks guys.

Di is probably a nice person and I wouldn't want anybody rubbing it in if I had been spectacularly wrong. But hey, put a projection out there and it's "on the record" so to speak. We're all friends here, so I'm willing to let a little "talkin' smack" slide. Fun is fun. I just hope you didn't have any real money on these nutty trades Di.

For all you who are keeping score, here was the latest sure thing:

"I think gold is done now. You can short it with stop at around 1630 or 1640. I had top targets for silver at 41 and gold at 1622, but they didn’t reach it. So, this could be it, now gold should go to 500 and silver around 6 bucks or so." Di...July 19th.

Yeah, I actually catalog these predictions.

I lead a rich full life.

September 7, 2011 | Unregistered Commenterfallingman


Hey fallingman, it's a good thing I emptied my bladder before reading your last line, otherwise I would be looking for a new chair .... I'm sorry, I'm not trying to rib you - it's just that I can relate to that and I know what you mean.


September 7, 2011 | Unregistered CommenterTJ


Have you tried knitting?

flower arranging!

chewing on wasps!

have a good un...

September 8, 2011 | Unregistered CommenterSilver Prices

I gotta tell ya guys, this banter is a good break from what is happening out there in the real world ... have fun, guys!

September 8, 2011 | Unregistered CommenterTJ

The chart looks great to us and silver had a good bounce today.

The stocks are also starting to pull their socks up and have a fair bit of catching up to do, so this quarter should to be a sparkling one, however, I need to knit a cardigan by Christmas so I'll sign off now and see you in January...

September 8, 2011 | Unregistered CommenterSilver Prices

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