Koos Jansen
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Koos Jansen
Posted on 17 Jan 2015 by

Guest Post: I have a Theory On The Swiss Franc

I have had a theory about markets for as long as I have watched gold. The theory is everything is about gold. Well, maybe not everything but close enough. Which is why the move by the SNB had me look at the charts. And those charts tell me a story that is very different from the official one. Now please understand I have zero proof outside of the charts, so this is speculation on my part but it is reasoned speculation as you will see.

I believe the SNB was massively short gold and dropped the peg to cover their short. Here is why I believe it.

On September 6, 2011 The SNB instituted a peg to stop the Franc from appreciating against the Euro. On that day the gold price topped. If you believe gold is a commodity and not a currency, stop reading. If you do believe gold is a currency this is noteworthy.


What we have established is there is some tie between gold and the SNB. It could be a function of a consortium of CB balance sheets but the top in gold and the peg are connected.

Fast forward to 2014 and we have the Swiss referendum where the Swiss equivalent of Yellen, Thomas Jordan took to the pulpit claiming gold is a mistake. He was quickly backed up by a shrill formerly of Citi claiming gold is a 6000 year bubble. Bottom line from all of this is the SNB did not want to buy gold. Even though the amount needed and time allowed were very reasonable, Jordan wanted none of it.

That takes us to 2015. The SNB announced they made $38 billion in 2014. Per Bruce Krasting that total was 50% of the Swiss government budget. Does that sound like a CB that is in trouble to you? What we were told is the SNB capitulated on the peg because Draghi was about to crush the Euro and coupled with inflows from Russian oligarchs the SNB was under enormous pressure. Again, that may indeed be the case but they had just made $38 billion in 2014.

In that time frame the EUR went from a high of 1.39 to 1.20 against the USD. The EUR was a basket case in 2014 and the SNB was in trader terms “killing it!”

But something has happened in the markets the past several weeks. Gold started to break out as we detailed in previous writings. Gold in Euros led the way and exploded out of a base.


Next we have gold in Yen.


And of course gold in dollars broke out of the bullish broadening wedge and has made the big move we showed was imminent due to the BB pinch.


That leaves me to the chart of gold in Swiss Francs, but first a few notes. Koos Jansen has done an amazing job in deciphering the physical flow of gold from West to East. In a recent piece he noted that amount of gold that is imported into Switzerland, refined and then exported. If any country knows about the flow of gold it is Switzerland. They are the refining hub. Did the SNB look at the data and realize that the physical offtake was reaching levels where it could no longer be ignored?

Lastly, there is the issue of technical analysis. Why I would not consider myself an expert I have watched the charts of the metals for over fourteen years and I do have an idea of patterns and how they play out. What I am looking for from the gold community is the following. Can anyone show me a chart of gold priced in any currency at any time that saw a clearly defined breakout after a lengthy consolidation fail and fail so spectacularly?

The chart shows a period of eighteen months where the price of gold denoted in Francs went sideways. And, it followed every other chart of gold and broke out convincingly. What happened next is a failure and for gold, which is about as technical a trade as there is in the markets, this was rare, very rare. Is it unprecedented? It could very well be.


How technical? Look where the price stopped on the plunge. Amidst all the chaos I am supposed to believe that those two lines which are very close to parallel are a random occurrence? You may choose to believe that but in my experience they are nothing of the sort.


It could all be one giant coincidence but I don’t believe it for a second. In my humble opinion the SNB was short gold and they needed to cover and cover they did.

Written by: It’s a Mystery

Koos Jansen
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  • http://www.bullionbaron.com/ Bullion Baron

    In my opinion the SNB peg and top in Gold were merely a coincidence, this doesn’t “establish a tie”.

    Some of the same factors (e.g. investors seeking a safety haven) were driving both Gold and the Swiss Franc (CHF) higher. It’s no real surprise that near the climax of their peaks in value (high CHF was negatively impacting their economy) the SNB felt a need to act and cap it’s value.

    On what market does the author suggest the SNB had the short position?

    For what purpose was the SNB capping the Gold price?

    Where did the funds come and go from in the SNB balance sheet to suggest such a position?

    The weak link drawn and coincidental events reminds me of this chart:


    Correlation ≠ causation.

    • KoosJansen

      Getting fun

      — Alex Stanczyk (@alexstanczyk) January 17, 2015

      • undeRGRound

        Koos, you are too nice to the trollZ

        Came here from a link @ Silver Doctors from Charlie :D

        Imagine the carnage had the Swiss voted PRO-GOLD!

        We’d be having this conversation post-SHTF :D

        • undeRGRound

          PS: you are a bang-up Occam’s Razor Practitioner ;)

        • KoosJansen

          I don’t see any trolls.

          • undeRGRound

            But I think your analysis is excellent, and rebuttals look like strictly opinion. You seem to be one of a very small group @ SD that does not get a ton of grief for your articles.

    • KoosJansen
    • Open Source Forex

      Maybe they were short in the Forex market? Perhaps they figured they had to hedge those Euros they were buying somehow as they were more than likely to decline. Maybe they looked around at the various markets and saw that gold had gone up so much that a pullback was likely. Is it really inconceivable that they were hedging their long position in EUR by going short XAU? After all these two assets are historically positively correlated so it might make sense to use a short position in one to hedge a long in another. That could potentially help explain why gold went up in every other currency except for CHF after the announcement as the Swiss central bank may have been selling Euros and buying back XAU shorts when they closed out their position and converted their profit to Swiss Francs.

  • dress

    SNB was not short gold. They just got worried they had to buy more worthless crap if they keep the peg to the €.

  • topshelfstuff

    I believe the point is that a Swiss Short Gold position became a Winner, instead of a Loser, had they not ReValued their currency.

  • Mark Richard

    How did SNB make all that money buying a declining Euro hand over fist to maintain the peg?

    • jj

      “How did SNB make all that money”

      Maybe they took a page out of the Goldman Sachs playbook and shorted themselves?

      • lll

        For all effective purposes Gold in Euros peaked in Sept 2011 along with the dollar. The after shock peak in Sept 2012 was a dead cat bounce and barely eclipsed the 2012 high (after a 30% dip). Gold in USD terms fell over $100/oz short of the previous years’ high in Sept 2012. Both were corrective B wave bounces.

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