Gold soared to yet another record high yesterday as global stock markets continued to see-saw, spooked by fears that Europe's continuing sovereign debt crisis might be about to spread to France.
Other safe havens saw interest too. The Swiss Franc dropped back from its recent all-time high against the dollar – but only after the Swiss National Bank (SNB) refused to rule out pegging the soaring currency to the euro.
"Any temporary measures toinfluence the exchange rate arepermissible under our mandate as long as these are consistent with long-term price stability," said Thomas Jordan, the SNB vice-president.
The value of the Swiss Franc has rocketed in the past month, against the backdrop of global markets roiled by the US debt ceiling debacle and subsequent credit rating downgrade, continued instability in the eurozone, and a slew of gloomy indicators from across the world warning of slowing economic recovery.
In a week that saw the Swiss Franc hit a record of SFr0.71 against the dollar and SFr1.01 against the euro – gaining more against the dollar on Tuesday than in any single day for 30 years – the SNB has stepped in twice in an effort to pare the gains by expanding liquidity in the market.
Yesterday's comments from Mr Jordan had an even stronger effect, sending the Swiss Franc down by 5 per cent against both the dollar and the euro.
Alongside the soaring Swiss Franc, the other safe haven asset sent stratospheric in recent weeks is gold. The price of the precious metal continued to climb yesterday, breaching the $1,800-per-ounce mark for the first time.
However, the yellow metal slipped back in afternoon trading as investors cashed in gains and markets were buoyed by US stocks opening higher.
One asset that wasn't in demand was 30-year US government debt. A $16bn auction of new Treasury bonds attracted fewer buyers thanexpected – as a result, the federal government will have to pay an interest rate of 3.75 per cent, more than 10 basis points more than the market had predicted.
While some traders saw theauction as an early test of investor sentiment on long-term Treasuries after the Standard & Poor's downgrade last week, others said the weak demand was the result of yesterday's specific market conditions, where newly-optimistic investors were choosing higher-risk equities over the relative safety of bonds.
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