“It is said that the Swiss love only money … this is not true. They also love gold.” Anonymous
The last time we checked, Switzerland was still part of Europe.
Then again, Switzerland has long been different from its European brethren. Switzerland is historically an observer, not a participant. Neutrality gives the country points for ethics among the peace-loving folk – although it didn’t stop the Swiss from dealing with the Nazis during World War II. 
Switzerland is also “the vault of the world.” It’s where money and wealth are omnipresent, but never talked about. “Swiss” and “bank” go together like “Swiss” and “watch.”
But there’s a big difference between the Swiss National Bank and the European Central Bank. While the ECB is likely to announce a quantitative easing program to fight deflation next week, Switzerland this week strengthened its currency with a surprise announcement that it was removing its cap on the value of the Swiss franc.
Quantitative easing would devalue the euro as new money is created to buy bonds. So while the ECB is fighting deflation, Switzerland is potentially contributing to it.
FX Shocker
In September 2011, the Swiss National Bank (SNB) capped appreciation of the Swiss franc at 20% above the euro. Switzerland’s economy is heavily dependent on exports; when a currency appreciates in value, its exports become more expensive, making it more difficult to compete internationally.
After removing the cap, which James Stanton, head of foreign exchange at deVere Group, called “the biggest FX shocker in years,” the Swiss franc rose in value by 30%. Too bad, of course, for those who had made huge bets on the franc dropping in value.
According to Bloomberg, “The shift marks an attempt by the SNB to reinforce its defenses of the economy before government bond purchases by the European Central Bank that could crumple the franc cap.”
In other words, the ECB is planning to announce its quantitative easing program. But Switzerland, apparently, recognizes that QE is likely to do more harm than good to the European economy and is going its own way.
Saving Swiss Gold
The SNB action comes shortly after the defeat of the “Save Our Swiss Gold” initiative, which we wrote about when we addressed gold hoarding in Europe recently.
The initiative would have forced the SNB to buy gold every time it buys euros, which it has done to curb the rise of the Swiss franc.
Gold hoarding in Europe has become as problematic as Aunt Bessie’s hoarding of old newspapers and magazines. On December 1, when we wrote about it, gold’s price had just come off of a four-year low, as wishful thinkers riffed on third quarter GDP growth and found that the economy was finally, truly, remarkably in hyperdrive growth mode.
Of course, that was the U.S. economy, not Europe. Economic growth in Europe is like cheap wine; it’s barely tolerated and rarely encountered. For that matter, the U.S. economy is still not so great, but that’s another story.
So what’s happened to gold prices since then? Over the past 30 days, the price of gold is up 6.92%.