zaterdag 17 januari 2015

The Effect of the SNB Depegging

There is so much to think about when we saw the depegging of the SNB this week. I don't have all the answers yet.

- What are the implications of the 80 billion loss for the SNB? Will the tax payer be hurt?
- What about the exports?
- What about the losses in the financial sector?
- What does this mean for the money printing announcement from the ECB next Thursday?
- What does this mean for the massive short positions in gold by the SNB?
- What will the euro do, continue its plunge?

First of all let's talk about gold, because that sector is most known to me.

We see that shorts kept covering this week and I believe next week the shorts will keep covering with a higher gold price. On the gold premium front, nothing special is happening. Premiums went down a bit due to an increase in gold price.

On the GLD front though, a fundamental reversal in the GLD stock level is catching my eye.

In just 2 days 23 tonnes of physical gold were bought at GLD. This tells me that hedge funds are starting to become long gold buyers. This SNB move could be a regime changer. Let's watch the GLD stock closely next week.

It is widely accepted that the ECB will initiate QE next week on Thursday at the ECB meeting. That's why the euro has been falling so rapidly. And that's also why the SNB had to depeg the Swiss franc from the euro. There was no way they could keep buying euro, the SNB balance sheet would explode. They rather just take their losses on the EUR/CHF, USD/CHF exchange rate and be done with it. Covering their gold shorts with it so they can benefit from the rise of gold after the ECB QE announcement. But this depegging decision could have consequences on the decision of the ECB next week. They might not do the QE now. We'll see what happens and act on it soon enough. But it's a no brainer to buy the gold miners at this stage. What the SNB did is a perfect catalyst for gold.

Here's Peter Schiff's take.

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