Switzerland is mulling drastic measures to fend off safe-haven flows from Euroland and stop the relentless rise of the Swiss franc crippling large parts of the country’s economic base.

By Ambrose Evans-Pritchard, The Telegraph

The franc retreated against the euro in a wild-one day move on Thursday after top officials at the Swiss National Bank (SNB) floated ideas for a temporary euro peg, a once unthinkable move.

“Nothing is excluded,” said Jean-Pierre Danthine, a SNB board member. “The situation is extremely complex and difficult. There is no magic wand.”

The Swiss franc has moved with gold over recent weeks, acting as a magnet for capital flight from the discredited debt currencies of West. The SNB said the franc is “massively overvalued” and has moved into dangerous territory over the past month.

The hotel and restaurant lobby GastroSuisse said the 240,000 strong tourist sector was in an “extremely precarious” state, while the machine tool industry risks major lay-offs and loss of investment to foreign sites.

The SNB has already flooded the banking system with SwFr80bn (£65bn), a vast sum for a country of less than 8m people. This was overpowered by a wall of money on Wednesday after contagion hit French banks and the US Federal Reserve pledged to hold rates near zero until mid-2013.

The SNB has since gone further, hinting at unlimited liquidity through swap transactions. Short-term rates have fallen below zero, leading to “negative carry” to deter hedge funds, but this may not be enough.

Kurt Schiltknecht, the SNB’s former chief economist, said every measure used to curb inflows in a similar crisis in 1978 proved a “failure”, including negative rates.

Eventually the bank set a target against the Deutschmark (10pc above market levels) and pledged to buy foreign currency with printed francs for as long as it took. “It worked well. After some hesitation, the market became convinced,” said Mr Schiltknecht. A euro peg would be similar.

Thomas Jordan, the SNB’s vice-president, said a “temporary link with Europe’s common currency” might be allowable under the bank’s mandate so long as it did not compromise Switzerland’s monetary independence.

Hans Redeker, currency chief at Morgan Stanley, said Swiss companies have been shielded so far by currency hedges taken out two years ago but these contracts are expiring.

“They are running against the clock. The Swiss economy has been stable until now because exporters are still operating at the earlier exchange rate. There could be significant problems next year.”

Denmark has avoided Switzerland’s fate by pegging to the euro, though the model may be hard to replicate. “Nobody is speculating with the Danish krona. I think a euro peg could work if the SNB is willing to defend the level by creating as much liquidity as needed,” said Mr Redeker.

The franc came within a whisker of parity against the euro this week before moving back to SwFr 1.08. It was trading above SwFr 1.65 to the euro before the credit crisis in 2008. Sterling has more than halved against the Swiss currency in just three years.

Anglo Far-East Custodial Company Selected as Precious Metals Agent for New Luxembourg-Regulated Physical Gold Fund

LUXEMBOURG, March 21, 2011 /PRNewswire/ — Anglo Far-East Custodial Company (AFECC) has joined ABN Amro, Las Bovedas Corporation SARL, and Luxembourg Fund Partners to launch a new physical gold fund regulated by the CSSF.

Under the Terms of Agreement, AFECC will provide all background logistics of acquisition, transport, auditing, safe storage and liquidation of the physical gold bars backing the Fund.

The Precious Metals Fund – LFP Prime SICAV SIF S.A. (Physical Gold Fund) won regulatory approval on March 15, 2011, and is listed under ISIN LU0596820836 for Class A and LU0596823269 for Class I shares.

“We are thrilled to be the Precious Metals Agent for this revolutionary new Fund,” said Anglo Far-East’s Founding Director Philip Judge. “We recognized the need for funds and institutions that wanted to back their offerings with physical precious metals in purely allocated bar form. This custodial governance model eliminates counterparty risk like you may have from the way other products have been structured in the past. Because of our experience and expertise in this area, AFECC is in the ideal position to provide the needed support to the Fund.”

“This Fund’s physical asset holding provides the lowest storage and insurance risk profile for a Gold Fund. Due to its structure, with this Fund the metal is not held or vaulted by an entity that may have positions in financial markets or OTC Derivative risks,” commented AFECC’s Treasury Director Simon Heapes. “This gives the benefit of guarding the Fund against a systemic domino effect in the economy which has become a concern for many investors in recent times. This unique custodial governance system was designed to closely reflect the time proven system Anglo Far-East has developed and successfully used for nearly two decades now that we refer to as the Chain of Integrity.”

About AFE Custodial Company

AFE Custodial Company (AFECC) is part of the Anglo Far-East group of companies and provides bullion logistics support to institutions, funds and trusts in the market of good delivery allocated gold and silver bullion. AFECC handles the full range of acquisition, storage and liquidation of good delivery metal on behalf of its clients. www.anglofareast.com/afecc

About ABN Amro

ABN AMRO Private Banking is the international wealth-management division of ABN AMRO Bank with EUR 150 bln of total assets under management offering more than 120,000 high-net-worth individuals a full range of banking, investment management, financial and estate planning products and solutions. Our domestic and international offices in 13 markets worldwide employ over 4,000 professionals. We rank among the top 10 private banks in Europe and enjoy a strong position inAsia. www.abnamroprivatebanking.com

About Luxembourg Fund Partners S.A.

Luxembourg Fund Partners S.A. is a bespoke independent advisory firm offering comprehensive and tailored solutions integrated through financial products of the Grand Duchy of Luxembourg. LFP is a market leader in the Fund industry and expert in building, administrating and managing Regulated Investment Funds and Investment Structures on behalf of private and institutional clients. www.lfp.lu

Original Newswire Link here

Apparently without announcement, IMF sold 5.6 tonnes in February
Submitted by cpowell on Mon, 2010-04-26 18:16. Section: Daily Dispatches
2p ET Monday, April 26, 2010

Dear Friend of GATA and Gold:

The Reuters story below reports the World Gold Council’s announcement of a sale in February of 5.6 tonnes of gold by the International Monetary Fund. The WGC is quoted as having discovered the sale in a recently published IMF statistical report. As far as we can determine, the IMF itself has issued no press release or other public statement about the February sales. So the identity of the buyers apparently cannot yet be determined.

Maybe the gold council has made a false assumption. It is quoted as saying that the IMF statistical report showed a 5.62-tonne reduction in the IMF’s gold holdings. Could the gold not have been sold at all but rather reclaimed by an IMF member?

For the moment it may not be possible to be sure of anything here, except that the comment attributed to the WFC that the IMF is undertaking its gold sales in a “transparent manner” is laughable. Transparent is the last thing the IMF is, and the last thing the gold market itself is. There’s a reason for that: market manipulation.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

World Gold Council Says IMF Sold 5.6 Tonnes in February

By Jan Harvey
Reuters
Monday, April 26, 2010

LONDON — The International Monetary Fund sold 5.6 tonnes of gold in February under the second phase of its gold sales programme, the World Gold Council said on Monday.

The IMF’s sales are taking place under the umbrella of the third Central Bank Gold Agreement, which began in September 2009. Signatories of the CBGA are largely euro zone central banks, the largest gold holder of which is Germany.

Total sales under the pact, which limits signatories’ gold sales to 400 tonnes a year, were just 7.2 tonnes to April 20.

The IMF began its planned sales of 403.3 tonnes of gold last year. After the sales reported by the WGC, plus those of 200 tonnes to India and smaller amounts to Sri Lanka and Mauritius last year, it has a further 185.7 tonnes of gold to sell.

“To date, 212 tonnes of gold have been sold by the IMF in off-market transactions and the April edition of the (IMF’s International Financial Statistics) reported a 5.62-tonne reduction in IMF holdings,” the WGC said in a report.

Separately, it said the remaining gold earmarked by the IMF for disposal would “be sold in a phased and transparent manner within the ceiling set by the CBGA, so as to avoid any disruption to the gold market.”

Among signatories of the CGBA, Germany has sold 0.9 tonnes of gold so far under the third CBGA, Malta has sold 0.3 tonnes, and unknown countries a further 0.4 tonnes, the WGC said.

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USA: 1-206-905-9961
Panama: 507-264-0164
New Zealand: +64-9337-0715
Australia: +61-8-8334-6855
Switzerland: +41-43-508-0351
United Kingdom: +44-208-819-3911
Hong Kong: +852-8124-1265

7p ET Monday, April 11, 2010

Dear Friend of GATA and Gold (and Silver):

The Melbourne Herald Sun, the largest newspaper in Australia, took note Friday of GATA’s complaint about gold and silver market manipulation at the March 25 hearing of the U.S. Commodity Futures Trading Commission. The notice came in a column by John Beveridge headlined “More Bull than Bullion” and was accompanied by a great cartoon. The Herald Sun does not seem to have posted the material on its Internet site but thanks to a friend in Australia we have a PDF image of it and have posted it at GATA’s Internet site here:

http://www.anglofareast.com/downloads/HeraldSun-Beveridge-04-04-2010.pdf

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

China Bank President tells it like it is (click here to view the video)
China can no longer afford to let gold or silver price slump
Chinese state endorsement of gold and silver as good investments means the country can no longer afford to let precious metals prices drop by any significant amount.
Author: Lawrence Williams
Posted: Wednesday , 09 Sep 2009

LONDON – With Chinese state institutions hawking gold and silver to the general populace as a good investment (see China pushes silver and gold investment to the masses) – the latest news on this front being that the biggest Chinese bank, the Industrial and Commercial Bank of China (ICBC), is setting up a special precious metals department to handle growing investor demand for gold and silver within the country, the corollary is that therefore the country cannot afford to let precious metals prices fall substantially and thus alienate millions of its citizens who have been taking state advice to buy them.
In a Reuters report the ICBC is quoted as saying “”China is the world’s largest gold producer and the second-biggest gold consumer, and Chinese always have a custom to keep gold as personal wealth. China’s gold market is growing rapidly and has a huge potential with the growth of individual incomes.” Surely yet another endorsement of gold as an investment by a Chinese state concern?
And China certainly has the power to manipulate the gold price in ways maybe not undreamt of by GATA which has long believed that there has been gold price suppression by western governments, central banks and financial institutions. This time the boot could be veritably on the other foot.
More…

* State-owned firms may default on commodity hedges – report

* Bankers dismayed, confused by report; seek more details

* Lawyers question legality of the move

* Traders suspect lurking losses may have prompted warning (Adds analysts comments)

*****

By Eadie Chen and Chen Aizhu

BEIJING, Aug 31 (Reuters) – A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.

The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.

While the details of the report could not be confirmed, it was Monday’s hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.

The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection against higher prices last year only to watch the market collapse — leaving them with losses.

While many companies including top airlines have come clean on the losses, some analysts fear another wave may follow.

“I wouldn’t be surprised if more state firms emerge with big derivatives trading losses, otherwise SASAC wouldn’t come out with such a radical move,” said a Hong Kong-based derivatives analyst, who like most other industry officials and bankers declined to be named due to the high sensitivity of the issue.

A SASAC media official said on Monday that he was waiting for the “relevant department’s” official comment before he can clarify to media. A government official said that the Bureau of Financial Supervision and Evaluation under SASAC was handling the issue. The official declined to be named and did not elaborate.

Spokespersons at Goldman Sachs (GS.N) and UBS (UBSN.VX) declined comment, and media officials at Morgan Stanley (MS.N) and JPMorgan (JPM.N) were not immediately available for comment. All are major global providers of commodity risk management.

No bank were named in the Caijing report. The SASAC media officer also declined to identify any specific banks.

“It’s a handful of companies who are being encouraged by regulators to re-negotiate,” said a second banking source. “It’s outrageous, but it’s China, so everyone is treading very carefully.”

Original Article here

“The Swiss have once again proven their sovereignty and respect for the financial privacy of individuals. This is a good day for the rule of law, and the protection of private property”. – Alex Stanczyk

—

Traditions die hard.

Since the founding of the Swiss Confederation in 1291, Switzerland has protected the privacy of its financial accounts. It may be the world’s most secretive banking jurisdiction, with a vaunted ability to protect its depositors from unwanted prying.

Switzerland converted this tradition to law in 1934, when it enacted its strict banking secrecy law. Revealing financial information without the client’s consent is prohibited.

For more than a year now, this tradition of bank secrecy, or financial privacy as the Swiss call it, has been under attack from one of the most powerful agencies in the world — the U.S. Internal Revenue Service. In July 2008, the IRS served a “John Doe” summons on UBS, seeking records that would identify U.S. taxpayers with accounts at UBS in Switzerland who have not reported these accounts to the IRS. UBS failed to comply with the summons.

So in February, the U.S. Department of Justice filed a petition to force the Swiss banking giant to turn over some 52,000 names of U.S. account holders the IRS suspects failed to pay taxes on earnings from those accounts, as required under U.S. law. UBS has continued to refuse to disclose the names, arguing that doing so would violate Swiss banking laws. It is a crime in Switzerland for bankers to provide information on client accounts to foreign tax authorities, and bankers who violate this law may be subject to criminal prosecution that includes the possibility of a prison sentence.

Fearing that UBS might, nevertheless, succumb to U.S. pressure, the Swiss government formally joined the fray in early July. The Swiss stated in a friend of the court brief that if a U.S. judge ordered UBS to turn over the account names, the government would seize UBS’ bank records, if necessary, to prevent UBS from divulging the information. Switzerland last took this type of action 25 years ago when it seized the accounts of tax fugitive Marc Rich.

The IRS countered, saying that while bank secrecy may be important in Switzerland, protecting that secrecy must be considered in the context of UBS actions. As the bank admitted earlier this year, UBS willfully assisted thousands of U.S. clients to evade hundreds of millions of dollars in taxes.

On the strength of information provided by former UBS private banker Bradley Birkenfeld on the bank’s tax practices, U.S. tax authorities were poised to tear down the wall of Swiss banking secrecy.
Yet, such an outcome now appears out of reach.

On July 31, just three days before the parties were to go to trial, the U.S. and Swiss governments reached a tentative agreement in a civil case filed on Feb. 19. This agreement, which has not yet been finalized, means that UBS is not likely to give U.S. tax authorities the names of all 52,000 American clients the IRS suspects are evading taxes on some $15 billion held offshore in secret Swiss bank accounts. Neither the U.S. nor the Swiss government provided details on the number of names that would be provided. On August 7, U.S. District Judge Alan Gold, who is presiding over the civil case, approved a request from both parties for another teleconference Aug. 12. A related but separate criminal case has been settled.

Original Article Here