Gold (NYSE:GLD) is up 1.7%, or $32, to $1,909 an ounce after the Swiss National Bank capped the Swiss franc (NYSE:FXF) exchange rate with the euro (NYSE:FXE) at 1.20. Investors are also pouring into the alternative currency as Eurozone markets fell hard yesterday and U.S. markets are opening down over 2%. Italy (NYSE:EWI) tumbled 5.3%, Germany (NYSE:EWG) fell 5.5% and France (NYSE:EWQ) dropped 4.9%.
Investing Insights: Will Gold Become Collateral for a Euro Zone Bailout?
Relatedly, Wall St. Cheat Sheet Chief Commodities Analyst Eric McWhinnie examined a new Wikileaks release revealing the thought process behind gold and fiat currencies such as the U.S. Dollar (NYSE:UDN) and Euro (NYSE:FXE). The new release says, “China (NYSE:FXI) increases it gold reserves in order to kill two birds with one stone. The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): According to China’s National Foreign Exchanges Administration, China’s gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. Dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaing the U.S. Dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.” Continue reading Eric’s thought-provoking analysis “Is China Buying Gold to Challenge the U.S. Dollar?“