The “black swan” suggests it’s time to buy gold

Last Thursday a “black swan” flew out. If you don’t know what “black swan” means, it is an analog that an unimaginable thing happens because in the real animal world black swans are rarely seen. This time, the “black swan” , something 100% unexpected, came out and shaked global finance. The Swiss National Bank (SNB) announced an immediate end to the Swiss franc’s artificial “peg” to the Euro.

About a year ago, SNB decided to peg the Swiss Franc against the Euro at a fixed exchange rate of 1.20, since Swiss Franc kept becoming stronger and stronger when Euro’s mess got bigger and bigger. What the peg means is basically the SNB has to print unlimited amount of Swiss Franc to buy Euro to artificially weaken Swiss Franc. They were successfullbut at the expense of accumulating an enormous amount of toxic currency, Euro. What they have now of Euro is equivalent to the amount of their GDP, which is obviously not sustainable. So finally they have to slap their own face by giving up the peg. As a reust the Swiss Franc got appreciated by 20% overnight. You may ask, what all about this has anything to do with the precious metals? Well, there are at least 3 main reasons why this SNB action suggests a bullish trend that may be starting:

·       This is clearly an indication that SNB is very pessimistic about the Eurozone and its currency Euro. In other words, the EU crisis will only continue, which is very positive for gold and silver.

·         It is becoming much more clear that we are in a world that there is a strong competition for currency depreciation among central banks. No one wants to have a strong currency. In the end, the only real strong currency left will be gold and its brother silver.

·         SNB’s action reminds everyone that there is no credibility anymore for central banks around the world. Ironically only about one month ago when asked about the peg, the SNB responded that the peg would continue forever as long as it was needed. What a shame! If SNB that is considered relatively more credible in the world cannot be trusted, who else can be? The paper fiat money can be easily printed any time at any amount as they wish. But the real money, gold and silver, cannot be printed. This is a huge plus for the precious metals.

I may be too early as usual but I truly believe that now is a great time to start accumulate gold/silver stocks again. It seems the uptrend has already started. There is a new ETF, SGDM, which focuses on the 25 top quality gold and silver companies. I think this is a good place to start.