Currency Turmoil Makes Precious….

Summary

  • What does the first two months of 2015 mean for precious metal?
  • Investors are now paying for the “privilege” of lending to broke governments.
  • Will the Fed chicken out on rate hikes?

The first two months of 2015 have seen turmoil in the currency markets extend from Russia and Ukraine to the heart of Europe.

“Central Banks Now Open 24/7 Fighting Currency Wars and Deflation,” blared a February 12th Bloomberg headline. Against this backdrop, precious metals have been on the rise in terms of all currencies except the Swiss franc and the U.S dollar.

In January, the Swiss National Bank shocked markets by announcing that it would de-link its currency from the euro. The move came one week ahead of the European Central Bank’s $1.1 trillion Quantitative Easing announcement. Swiss officials decided it would be too costly to keep accumulating depreciating euros in order to maintain the currency peg. The Swiss franc surged by the most ever in a single day.

With the exception of Switzerland, all other countries in Europe (and many others around the world) are trying to depreciate their currencies.

Since January 1, the following central banks have announced interest rate cuts or other monetary easing measures: European Central Bank, Reserve Bank of Australia, Reserve Bank of New Zealand, Monetary Authority of Singapore, and the central banks of India, Canada, Denmark, and Sweden.

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