Gold Surges in a Volatile Market

The price of gold took off this morning when news broke that the Swiss National Bank has removed the euro cap on the Swiss franc. For three years, the franc has had a ceiling of 1.20 francs per euro. When the cap was removed, the currency surged 30% against the euro, sending currency traders scrambling into gold as a safe haven. Gold surged more than 2% and is currently hovering around $1,260.

Currency markets aren’t alone in their volatility this week. Yesterday, US stocks took a big tumble after investors were surprised by a drop in December retail sales. It’s been a choppy 2015 in general, with the Dow making 100 point moves almost every day of January. The Volatility Index has risen almost 20% in 2015.

Michael Snyder at The Economic Collapse blog has written a good article reminding us of the last time we saw stock market volatility like this – just before the 2008 financial crisis.

The Dow has now experienced the longest losing streak that we have seen in 3 months, but that is not that big of a deal. Of much greater concern is the huge price swings that we have been seeing. Remember, the three largest single day stock market increases in history were right in the middle of the financial crisis of 2008. So if stocks go up 400 points tomorrow that is NOT a good sign.

What we really need is a string of days when stocks move less than 100 points in either direction. If stocks keep making dramatic moves up and dramatic moves down, history tells us that it is only a matter of time before they collapse. Any student of stock market history knows that what we are witnessing right now is exactly how markets behave right before they crash.

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