Mike Maloney does a great job explaining how people are underestimating the impact of the Swiss National Bank de-pegging their currency from the Euro. He believes the reverberations will impact global markets for years and could impact the Swiss economy for decades.
There are wide-ranging opinions regarding how this move by the SNB will impact gold. Some believe it will end central bank gold manipulation, others believe it is not a game changer. Koos Jansen has floated the theory that the SNB was massively short gold and dropped the peg to cover their short. Charting the gold price, we can see that gold started its multi-year correction at the time the SNB pegged their currency to the Euro in September of 2011.
And of course, we know that gold has been rocketing higher ever since the SNB announced they would no longer peg their currency to the Euro. The gold price is up roughly $75 is just three days.
Whether or not the SNB was short gold, it makes sense that they are anticipating a massive QE announcement from the European Central Bank (ECB) and wanted to get out ahead of the move. We will find out for sure tomorrow and I expect gold will benefit from another massive stimulus program, even though the dollar is likely to strengthen in the short term versus the Euro.
Several brokerage houses have gone under as a result of the SNB move. Extreme leverage with the inability to execute stop losses on positions has cost the financial system and currency traders losses estimated at over a billion dollars.
When combined with the deflationary pressure we have been seeing globally, the Russian crisis, commodities falling, Europe on the brink of Recession, Greece likely to exit the Euro, the loss of jobs in the energy sector and yet unknown derivatives losses from the massive drop in oil prices, the potential for global shockwaves is enormous.
Mike Maloney believes the central banks are acting desperately and are now backed into a corner. The great collapse is unfolding slowly, but on a major scale. However, he says the pace of collapse will pick up and eventually accelerate overnight. These types of events will be bullish for precious metals, although the economic chaos that accompanies it will be painful in the short term. The light at the end of the tunnel is that such an economic collapse should allow us to reset the system to one with more free enterprise, less crony capitalism, sound money and an overall more sustainable and fair economic system.
Buckle up, hold tight and make sure you have precious metals in your possession before the next shoe drops. 2015 promises to be a very volatile year for the market and gold is going to once again establish itself as the primary safe haven asset.