2011-07-21 08:19:24
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.