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Gold erased its earlier decline and gained smartly towards mid-European trade after the Swiss National Bank cut the interest rate to minus 0.75 per cent and scrapped its minimum exchange rate of 1.20 Swiss francs to a euro, which boosted fundamental sentiment towards the yellow metal.
Following the interest rate cut in Switzerland, gold moved up to $1,255 an oz in London’s early Thursday trade. However, profit booking from a section of traders pulled it down to $1,250.4 an oz towards early afternoon.
However, as mentioned, the Swiss central bank had also said it was scrapping its minimum exchange rate of 1.20 Swiss francs a euro and raised the fees it would charge banks to deposit money. The franc rocketed beyond parity, with the euro following. This move is seen as a medium-term pressure point for gold. For bullion market globally, Switzerland has been a very important centre for importing gold.
Rhona O’Connell, head of metals research at GFMS Thomson Reuters, said: “My take on the Swiss move is that it’s actually marginally negative for gold in terms of medium-term sentiment. What we have at present is a knee-jerk due to currency moves. If one looks at the Swiss National Bank announcement, they are talking about the reduction in the CHF (Swiss franc) level against the dollar and euro, reflecting in part the euro depreciation against the dollar. Also, they are talking about the reduction in the very high levels of uncertainty in the financial markets, and pointing to the divergence among the major currencies, trends that they expect to become even more pronounced. So, if they’re right, that points to pressure on gold.”
Standard gold at Zaveri Bazaar here remained volatile, with its price two per cent lower on depreciation in the rupee. But, as the currency recovered its earlier depreciation, gold moved in line to close with a marginal gain of Rs 150 at 27,400 for 10g. In morning trade, ikt was Rs 26,700 for 10g. According to dealers, spot buyers held back, waiting for price stabilisation. Retail consumers deferred fresh purchase, resulting in over half of the daily average volume accruing on Thursday.
