The Risk Off Trade is in full swing this week. If institutional investors are feeling the effects of uncertainty in the markets, they will leave emerging market bonds, for example, but above all the equity markets. Then they quickly buy the supposedly “safe havens”, such as the Swiss Franc and Gold. Important: Please also read our latest supplementary comment at the end of this article about what happened a few moments before this article was completed!
Above all, the current ” escape ” into safety was fuelled by Donald Trump’s statement yesterday that it might be a good idea to postpone the trade deal with China until after the US elections in November 2020. Ruummmmmmms. What a shock for the stock markets! For example, the Dow 30 has fallen 700 points since the end of last week. The S&P 500 has fallen by 56 points. At 3,088 points, it is already running towards a 2% loss. The Swiss Franc profited well from this. The most important Swiss Franc currency pair, the Euro vs. the Swiss Franc, has fallen well since the stock market collapsed at the beginning of the week. So the Franc has strengthened. The following chart shows Euro vs. Franc since November 21st. EURCHF has fallen 95 pips to 1.0925 since Friday evening. This is a clear increase in the value of the Franc!
If we look at the larger picture, the Swiss Franc tends to start its September lows at just over 1.08 again. A little bit is still missing. But if the equity markets weaken further, and Donald Trump sends another strongly negative signal like yesterday, EURCHF could fall further. But you know… Donald Trump is very important to the US equity market. He sells the rise of recent years as “his” rise. So optimistic statements from him could follow, so that the stock markets can calm down again?
Price of Gold
In addition to the Swiss Franc, the “safe haven number 1”, namely Gold, has benefited from falling stock markets and negative Trump statements since the beginning of the week. Since Friday evening, the price of Gold has risen by 20 Dollars to 1,483 Dollars. The following chart shows the price trend since the beginning of November. With this week’s rise, Gold can break out of its range – for now. From the bulls’ point of view, further negative news on the trade war is needed.
Current: Upps, suddenly there are reports again that an agreement in the trade war between China and the USA could be possible relatively quickly. And zack, stock indices are rising and Gold (-7 Dollars) and Swiss Francs are falling.