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Swiss Negative Deposit Rate Could Help Gold Prices – HSBC

By Kitco News
Friday December 19, 2014 10:41 AM

(Kitco News) - The Swiss National Bank’s surprise announcement Thursday to introduce a negative deposit rate could help gold prices down the road, according to analysts from HSBC.

According to the central bank’s press release, it will charge 0.25% “on sight deposit account balances at the SNBS.”

The bank also reaffirmed its commitment to defending its minimum exchange rate against the euro, maintaining a floor of one euro to 1.20 Swiss franc. The central bank also said that it is prepared to buy unlimited quantities of foreign currencies and take further action if required.

In a research note published Thursday afternoon, analysts at HSBC said that the introduction of negative interest rates, which is now in-line with the ECB’s monetary policy, could make the Swiss franc less attractive as a “safe-haven” currency.

“This could have real implications for gold prices,” they said in the report. “If investors … find that the CHF no longer looks so attractive based on SNB actions, then investors may shift to other perceived hard assets. Gold would certainly count as one of these assets.”

The analysts said that gold has not benefited from the safe-haven trade since the financial crisis.

However, in the short-term the $1,200-an-ounce area is expected to continue to act as a barrier for gold prices, they added.

The analysts explained that a stronger U.S. dollar and a recent rally in equity markets have reduced some bullion buying.

By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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