Gold prices have been soaring over the past couple of years on a weaker dollar, and now, they have a new reason to climb even higher — a weaker Swiss franc.
Gold prices often rise when paper currencies weaken, and the yellow metal has pushed up past $1,880 per ounce, mainly due to a weak dollar and euro.
A good deal of investors had fled to the Swiss franc as a hedge against a softer greenback and euro, but authorities in Switzerland took measures to weaken their currency, which had arguably grown too strong.
A strong currency can make a country's exports too expensive and hurt the trade balance.
With the Swiss franc weaker and Japanese authorities working to prevent their own currencies from climbing higher, gold is becoming more and more attractive.
"With Japan massively intervening in the (currency) market and the Swiss effectively curbing the safe-haven status of the Swiss franc today, we only really have gold as the last-standing safe-haven currency around," David Rosenberg, senior economist and strategist at Gluskin Sheff in Toronto, writes in a note, according to CNBC.
Investors are worried the debt issues in Europe and may send shockwaves across the continent and beyond, bruising currencies in the process and sending more fleeing to the precious metal as a safe haven.
"Europe has the capacity to drive gold higher as it looks unlikely to have its problems resolved very soon," says Darren Heathcote, head of trading at Investec Bank (Australia), according to Bloomberg.
"I don’t think investors are really convinced that European governments have got what it takes, got the political will to sort out the crisis and also do it sooner rather than later."
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