Black Swans take golden flight

Posted | 28/01/2015 / Views | 3013
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A Black Swan is the common term for an ‘unforseen’ event that has a large impact on financial markets.  The Swiss National Bank move earlier this month was a classic, albeit milder, example.  It came without any warning and sent shockwaves through markets around the world.  Gold and silver are the best performing assets so far this year, and for many it is because of the increasing threat of future Black Swans.  Right now we have unknown consequences of a possible Grexit (leading to Italy, Spain etc?) and default on Greek debt (EUR360b) by the new ruling Syriza party, Chinese growth slowing (they just gave up on a ‘target’ for 2015), escalating tensions in Ukraine again (and critically now around the land bridge region to Crimea), possible tightening of policy by the US Fed (all eyes on FOMC minutes tonight), the threat of a strengthening USD on emerging markets, and unintended consequences of the ECB’s huge quantitative easing program just to name a few ‘known unknowns’ without even touching of the Rumsfeld ‘unknown unknowns’.  

In our shop here, where the local rubber hits the road, we are seeing more large sophisticated money purchases confirming the global trend.  By definition a Black Swan gives no warning.  Something snaps.  In a world, strung out, interlinked and ‘derivativised’ like never before that snap could be severe.  The old gold buyer’s adage “better a year to early than a day too late” may never be more true when it happens.