Gold falls back from record high

Gold fell from record highs Tuesday after Switzerland\'s decision to peg its currency to the euro shook financial markets and battered the franc, putting the price of bullion in Swiss francs on track for its largest daily gain in three years. The Swiss National Bank said Tuesday it would set a minimum exchange rate target of 1.20 francs (Dh5.14) to the euro and would enforce it by buying foreign currency in unlimited quantities. The Swiss franc tumbled by more than seven per cent against the dollar and by more than 8.5 per cent against the euro. Gold priced in the Swiss currency rose by more than seven per cent, and was set for its biggest daily gain since mid-September 2008, when the global credit crunch intensified, prompting the US Federal Reserve to halve rates to 1.0 per cent. Spot gold was last quoted down 0.6 per cent at $1,891.60 (Dh6947.28) an ounce at 1044 GMT, having risen earlier to a record $1,920.30 an ounce. \"Particularly for investors with proportional assets in Swiss francs, this will strengthen the appeal of gold relative to the Swiss currency. It has to be seen as bullish certainly from the private bank side of the gold market,\" said Credit Suisse analyst Tom Kendall. Risk-free assets \"We\'ve seen US Treasuries have their reputation as ‘risk-free assets\' damaged. Now we\'ve got the Swiss franc subject to substantial and ongoing intervention by the SNB and so yes, it does strengthen gold\'s claim as a safe-haven.\" Gold\'s 34-per cent rally so far this year, fuelled largely by the impact on the currency markets from investor concern over the damage to the US and Eurozone economies from their vast debt burdens, is the largest yearly gain since 1979. Market players are increasingly unconvinced of European leaders\' ability to tackle the regional debt crisis and prevent it spreading, while the resilience of the US economy is coming into greater doubt after last week\'s employment report showed zero growth in the number of jobs created in August. In the money markets, some indicators of funding stress are back at levels last seen in 2008, when the global credit crunch unfolded, pushing up inter-bank lending rates to the point where credit markets were frozen and central banks pumped trillions of dollars into the financial system. Traditional safe-havens such as government bonds, gold and the Swiss franc itself usually benefit in times of financial or economic uncertainty. After the downgrade to the triple-A credit rating of US debt and the SNB\'s decision to peg the franc, gold could well be the last remaining true safe-haven, but investors have not been flocking to it in droves in recent weeks. The latest data on flows into exchange-traded funds shows global holdings of gold have fallen by nearly 2.5 million ounces over the last month to their lowest in six weeks at 67.4 million ounces. \"It\'s the fact that we are seeing one of the central banks making a move and taking a decision. We\'ve been left in limbo for days in Europe,\" said Saxo Bank senior manager Ole Hansen. \"If we see the Swiss franc pegged, where else can you go if the uncertainties continue other than into gold?\" Adding to the longer-term case for holding gold, workers in Italy began a strike yesterday as the centre-right government of Prime Minister Silvio Berlusconi scrambled to secure parliamentary backing for a package of austerity measures. In Spain, a union leader told state television that in mid-August the prime minister told unions the country was close to needing a bailout, at a time when markets had driven yields on Spanish bonds dangerously close to the levels that forced Greece and others to seek emergency funding. In other precious metals, silver fell 1.6 per cent to $42.22 an ounce, along with platinum, which fell 0.9 per cent to $1,865.99 an ounce. Palladium was trading up 0.6 per cent at $765.00.