Switzerland's National Bank (SNB) will bring in a negative interest rate cutting the value of large sums of money left on deposit in the country.
The Bank is imposing a rate of minus 0.25% on "sight deposits" - a form of instant access account - of more than 10m Swiss francs ($9.77m).
It is trying to lower the value of the Swiss franc, which has risen recently.
Russia's market meltdown and a dramatic plunge in the oil price have led investors to seek "safe havens".
The announcement sent the franc lower, and in early trading the euro was buying 1.201 Swiss francs, fewer than the 1.203 it was worth before the news, just within the target.
Switzerland typically sees money flow in during economic uncertainty.
The new rate will be introduced on 22 January and will only affect banks and large companies who use the "sight account" to transfer funds quickly and without restrictions.
A negative rate means depositors pay to lend the bank their money.
Geoffrey Yu, a currency strategist at UBS, said: "In the short term it gives them some breathing space.
Continue reading the main story Euro v Swiss Franc
Last Updated at 18 Dec 2014, 12:26 ET
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EUR:CHF intraday chart #$%$1 buys change %
"If you hold Swiss francs right now you do have to bear a cost. New buyers will be forced to think twice."
ZURICH—Switzerland’s central bank Thursday said it would introduce negative interest rates to cool the strength of the Swiss franc, a move that comes as central banks across Europe scramble to protect their economies from the threat of falling consumer prices.
With its move, the Swiss central bank joined others in Denmark and the eurozone in enacting a policy aimed at discouraging banks from parking excess funds with the central bank. It highlights the divergent paths being taken by policy makers in developed economies as their economies recover at varying speeds.
In the U.S., the Federal Reserve is expected to start raising rates in the middle of 2015, while the Bank of England could follow suit later in the year. By contrast, central banks across much of the European continent may keep easy-money policies in place for years as their interconnected economies force officials to one-up each other on aggressive policy moves.
“Divergent monetary policies were very much a prospect already, but the latest events have been exacerbating this,” said Jonathan Loynes, economist at consultancy Capital Economics.
SNB Negative Rate Timing Bold, Says IG The Swiss National Bank’s decision to impose negative rates was anticipated, but it wasn’t thought likely to do it this soon, according to IG Bank. “The SNB implemented this tool well before the next European Central Bank meeting, where a proper QE will most probably be announced,” says analyst Laurent Bakhtiari. “The SNB played the first move very well, and from now on it will have to stay one step ahead of the ECB if they want to defend the 1.20 minimum rate, and some other unconventional measures should be expected in the future,”
In June, the European Central Bankintroduced negative interest rates on deposits with it, a move designed to encourage banks to lend rather than park money.
The ECB is expected by analysts to step up its stimulus efforts as soon as its next meeting on Jan. 22—the same day the SNB policy comes into force—by announcing a large-scale asset-purchase program that includes government bonds.
The SNB said the timing of its negative rate was unrelated to the ECB meeting and instead fulfills its obligation to give banks 30-days’ notice of its rate change.
The central bank of Denmark, which isn’t part of the eurozone, has also used negative interest rates.
“The SNB has bowed to the inevitable,” said Kit Juckes, macro strategist at Société Générale. “If 2015 brings more ECB easing and the start of Fed tightening, it is going to be difficult to hold it and this may not be the last step they take.”
Europe’s challenge is complicated by tightly linked economies that operate under multiple currency and monetary policy regimes, with the ECB as the driving force, given its size. If the ECB takes aggressive stimulus measures, as it did in September and is expected to do early next year, the response is typically a weaker euro against other European currencies.
This damages exports from Switzerland, Sweden and other European economies that don’t use the euro and puts more downward pressure on consumer prices. The response of many of these central banks has been to loosen their own monetary policies.
Denmark’s most recent deposit rate cut came hours after the ECB lowered its rate again in September. Sweden’s central bank cut its benchmark lending rate to zero in October.
The SNB’s move will widen the range for three-month Swiss franc Libor, a key interest rate, to minus 0.75% to 0.25%.
The move is the first change to the SNB’s three-year policy of defending its minimum exchange rate through the purchase of euros, a practice which has seen its foreign currency reserves swell to more than 460 billion Swiss francs ($473 billion).
The SNB has intervened in currency markets in recent days, the bank’s chairman Thomas Jordan told reporters Thursday.
Action comes after upward pressure on franc
It is widely known that Barrick is keen to share the enormous financial burden of Pascua-Lama with a partner or two, and Zijin has been named as a potential buyer of other Barrick mines in media reports. Barrick chairman John Thornton has deep links to Asia and has talked about forming partnerships with Chinese mining companies.
Barrick, the world’s biggest gold miner, decided to search for a partner on Pascua-Lama after it bungled construction in spectacular fashion.
When the company began building the mine on the Chile-Argentina border in 2009, Pascua-Lama was supposed to cost US$3-billion. When construction was halted last year, the estimated cost was US$8.5-billion and rising. Barrick ran into many unexpected challenges during construction and also ran afoul of Chilean regulators, who halted the project last year amid concerns about the water management system.
Barrick recorded an astounding US$5.1-billion writedown on Pascua in August of 2013.
The company has said it wants to re-start construction, but needs to see a significantly higher gold price before it will commit. Barrick has a highly levered balance sheet, so bringing in a partner to share the cost is important to prevent it from getting too stretched.
Zijin, which trades in Hong Kong, has a market value of roughly $9.5-billion. The company has come under fire in China over pollution scandals.
The Barrick partnership is Ma'aden's latest move to diversify. Ma'aden, formed in the late 1990s to develop Saudi Arabia's mineral resources, was wholly owned by the government before half its stock was floated on the Saudi Stock Exchange in 2008.
The company originally focused on mining gold, but has been forging alliances with large North American firms, and recently signed a $5-billion US financing deal for a huge $7.5-billion phosphate project in the kingdom.
The phosphate project in the northern city of Waad al-Shimal is a joint venture between Ma'aden, Saudi Basic Industries Corp and North American fertilizer maker Mosaic Co.
Ma'aden and U.S. aluminum maker Alcoa Inc. have also partnered and run a massive $10.8-billion aluminum smelter in the kingdom.
A source familiar with discussions between Ma'aden and Barrick said talks to form an alliance have run since last year.
The source, who was not authorized to publicly discuss the details, said the partnership could be a first step toward broader ventures between both parties.
Dec. 18, 2014 8:53 a.m. ET
Barrick Gold Corp. said Thursday it will suspend operations at a copper mine in Zambia and record an impairment charge after the country passed legislation to more than triple the royalty rate on open-pit mining operations.
The Canadian mining giant said the new taxation regime eliminates corporate income tax, but imposes a 20% gross royalty on revenue “without any consideration of profitability.” The previous rate was 6%.
“The introduction of this royalty has left us with no choice but to initiate the process of suspending operations at Lumwana. Despite the progress we have made to reduce costs and improve efficiency at the mine, the economics of an operation such as Lumwana cannot support a 20% gross royalty, particularly in the current copper price environment,” Co-President Kelvin Dushnisky said in a statement.
China is the world’s largest consumer of copper, and signs that its growth is slowing have weighed on copper prices all year.
Toronto-based Barrick had warned in October it might halt operations at Lumwana if the country raised the royalty rate.
Like other miners, the company has been under pressure in recent years to cut costs and focus on more-profitable projects amid lower commodity prices and after building up large debts buying assets during the boom years.
Barrick said it would record the impairment charge related to Lumwana in the fourth quarter. The operation’s current net carrying value is about $1 billion, it said.
The operation will be put on a care and maintenance basis, with job cuts starting in March. The mine supports about 4,000 direct jobs, it noted.
Lumwana produced 138 million pounds of copper in the first nine months of the year, Barrick said.
"Based on its current assessment, the committee judges that it can be patient in beginning to normalise the stance of monetary policy," the Fed said in a statement. Significantly, the Fed said it viewed that statement as "consistent" with its previous language that it would be a considerable time before it hiked rates
“The potential for a recovery in prices through 2015 is much better than it was this year, despite the expected liftoff of the U.S. Fed Funds rate,” ANZ said in the report today. “We expect gold prices to rise steadily through 2015 and end the year at $1,280 an ounce.”
As for interest rates, Shilling doesn’t expect the government to intervene quite yet: “The fed is on hold for probably a couple more years. We’re in that deleveraging. It’s overwhelming all the fiscal stimuli we’ve had. It’s resulting in slow growth. It’s a continuation of the 2% real GDP growth in this country”, says shilling.
Federal Reserve two day meeting beginning on Tuesday 16th & 17th December. Gold prices traded positive last week on account of technical buying....U.S. Federal Reserve policymakers prompted a sharp pullback in the dollar. Weakness in the dollar index coupled with bad economic data from China and Japan lifted the safe haven appeal of the yellow metal China’s imports dropped and Japan’s economy shrank more than initially reported in the third quarter on declines in business investment.
Even if Sky is falling, nothing but the Gold will Hold by itself.
Opportunity still knocks...
FED SOLD GOLD TO KEEP DOLLAR STRONG ....How long FED can do that.? US National Debt crossed $18,015 Trillions...and US gold reserve against that depleted less than China, India , many other economy in the world..