A third theory, put forward by Australia's ANZ Bank on Friday, is that the SNB is suddenly much less willing ‘to be a major provider of safe haven investments’.
Previously, speculators (and Russian oligarchs) had been able to buy 'safe haven' francs at much depressed prices. Because the SNB had been keeping them cheap with that ceiling of CHF 1.20 per euro. But that was getting politically tough (if not morally so, as Simon Derrick at BNY Mellon notes of the Russian inflows of cash during the latest ruble crash) after the anti-QE, pro-gold referendum held at the end of November.
Yes, the proposals to boost SNB gold holdings failed, thanks to being both bad policy and also wide open to accusations of simply trying to make gold owners rich. But it did hint at deeper discomfort amongst at least one in four Swiss citizens over the swollen central-bank balance sheet, and the gift to speculators which cheap Francs provided.
That gift paid off big time on Thursday. The SNB's decision gave FX speculators (and Russian squillionaires) just the surge in franc value they were betting on. But it also led the world deeper down the rabbit hole of negative interest rates. Because while the Swiss have abandoned a currency target, they're now targeting three-month interest rates as low as minus 1.75% per annum.
So, the world's wealthy can hoard their savings in the 'safe haven' Swiss currency if they wish. But it will cost them, the SNB is saying. Holding cash will NOT be rewarded, even if the currency value rises.
‘While the cost of holding gold is negligible, the Swiss one-year deposit rate has fallen to -0.5% overnight,’ says ANZ. What's more, and while ‘for most participants, the yield on holding gold is effectively zero ... for those who are able to lend the metal; a positive yield on physical holdings can be earned’.
That sure beats francs ... unless the franc keeps surging in value. In which case, as the SNB's announcement made plain on Thursday, a return to currency pegging is only ever one more press release away.
So too is QE money printing by the Bank of England ... and even the US Fed. The Swiss have now untied their franc from the euro because they clearly expect just such big QE news from the European Central Bank in Frankfurt next Thursday. So too does the gold price.
Are you all ready too?
