Since Lehman Brothers failed in September 2008, the Swiss franc was seen as a safe haven currency. It has experienced a parabolic rise as financial instability beset many of its neighbours as well as the US. Recently the Swiss National Bank announced measures to decrease the value of Swiss franc by pegging it to the Euro. The SNB did this in response to worries that the ever-strengthening currency would jeopardize the country’s export-based economy. This had the effect of decreasing the Swiss francs value by 8% and there was massive volatility on the currency markets.
The SNB’s move was widely viewed as positive for another “safe haven” – gold. It’s thought the metal will gain even more popularity as a safe-haven investment of choice. Gold possesses the added advantage of independent movement, particularly important when most other market assets are moving in the same direction, a trend known as correlation. Indeed, as the threat looms of a global competitive devaluation—where central banks continue to debase currencies in an attempt to gain a leg up in the world trade markets—thus making gold even more valuable as an inflation hedge. Worries over global recession and the debt crises in peripheralEurope have only enhanced gold’s attraction.
In a recent interview, famous investment expert and author Marc Faber expressed the following views “ one more currency that was perceived to be a safe haven, is no longer a safe currency because it’s pegged to a relatively weak currency, the euro. Therefore I think investors will increasingly ask themselves, ‘If I want to hold cash and I have US dollars, they are not very desirable because of the money printer Bernanke.’ The euro, not very desirable because they will overprint money and they will probably issue euro bonds at some point and monetize them “Then they look at the pound sterling and so forth, in terms of paper currencies there is nothing really very desirable. Then people will ask themselves, ‘How can I park some cash in something that will maintain its value over a long period of time?’ Then they will look at gold and silver.”
When asked what investors should do in the current environment he said “simply – you have to be diversified. You know if you look at the last two to three years, if you owned some equities around the world, if you owned some property, if you owned some gold and if you owned some cash, you didn’t do all that badly. But recently stocks have been down and gold has been up, so I think gold is a good hedge against financial assets.”
Sound advice in my view!
Too see the full article with Marc Faber click the link below
http://www.kingworldnews.com/kingworldnews/Broadcast/Broadcast.html
Please email me on steve.garavan@fbdlife.ie. if you would like any further information on investment matters.
-Steve Garavan
Filed under: Ask the Experts, Investments, Managing Your Money, Money Saving
