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Gold and the Swiss franc - Flight to safety

Investors push up the price of gold and the Swiss franc

WHEN the going gets tough, investors buy two assets: gold and the Swiss franc.

Gold's all-time peak in real terms was in 1980 when inflationary fears were

particularly intense. That followed a long period of Swiss-franc strength in

the 1970s, which forced the government to impose negative interest rates in a

bid to dissuade foreigners from opening bank accounts in the currency. With

investors now worried about European sovereign debt and the crisis over the

American debt ceiling, it is not surprising that both assets are popular again.

Gold has been hitting nominal highs, while the Swiss franc has reached a record

in real trade-weighted terms (ie, against the country s trading partners). The

Swiss have both a fiscal and a current-account surplus, a low inflation rate

and a relatively low debt-to-GDP ratio.