Denmark, Gold and the Euro

Denmark, Gold and the Euro.

The National Bank of Denmark Vows to Maintain the Krone Euro Peg.

Buy Gold Online

Danish FlageuroDanish gold

Will Denmark Abandon the Krone Euro Peg?

We have the necessary tools to defend the peg,” Karsten Biltoft, head of communications at the Danish National Bank.

The Swiss National Bank Cries “Uncle”.

Earlier this month, the Swiss National Bank (SNB) announced that it was ending its practice of maintaining a 1.2 to 1 Franc to Euro peg. The Swiss National Bank had maintained that peg by printing Francs in order to buy Euros. Since 2011, when the SNB began the practice, it has amassed hundreds of billions of Euros. The unexpected SNB announcement came just a week before the European Central Bank announced its highly anticipated first quantitative easing (QE) program.

The SNB knew that a European QE program would weaken the Euro further and would require the SNB to print even more Francs to maintain the peg, so it gave up. The SNB decision caused an immediate increase in the value of the Franc and corresponding immediate losses for those short the Swiss Franc. The full impact of the SNB decision to drop the Franc Euro peg has not yet been fully quantifiable or felt. (One small example of the collateral damage done by the SNB removing the peg: 60,000 Croatians who hold mortages indexed in Swiss Francs were crushed by the Franc’s surge and have been provided with government relief.)

It is certain, however, that defending the peg was an open ended project with open ended liabilities that had to end at some point.

Denmark – To Peg or Not To Peg?

Denmark is a member of the European Union but has not adopted the Euro as its currency. The Danish National Bank (DNB) continues to issue its own currency, the Krone. Like the SNB, the DNB has decided to peg its currency, the Krone to the Euro. The DNB has set the Kroner/Euro peg at about 7.46 to one.

Denmark faces the same dilemma the SNB faced earlier this month- how long can the peg be maintained? Supporting the Krone Euro peg just got more expensive with the SNB abandoning its Franc/Euro peg and the ECB announcing QE. According to Bloomberg, the DNB “may have sold as much as 100 billion kroner ($15.3 billion) in January to weaken the Krone.”

The Danish National Bank is putting on a brave face insisting that it can and will maintain the peg. Recall, however, just a week before the SNB abandoned the Franc Euro peg it was insisting that maintaining the peg was central to its policy and would continue.

Enforcing the minimum exchange rate of 1.20 per euro is absolutely central to ensure adequate monetary conditions in Switzerland” was an oft repeated refrain of the SNB President, Thomas Jordan.

Denmark and Negative Interest Rates

In addition to selling Krone to weaken its currency, the DNB has been lowering its interest rate and taking it into negative territory. The DNB cut its benchmark rate three times in January. The deposit rate now stands at negative 0.5%.

Denmark is not Switzerland. Sure, it’s Not.

Will Denmark support the peg? The financial media insists that Denmark won’t pull a Switzerland -not that one would blame them if they did.

“The risk of the Danish central bank capitulating and letting the krone appreciate is very remote,” Andrew Kenningham, an economist at Capital Economics wrote in a research note.

Head of communications at the DNB Mr. Biltoft scoffed at the notion that the DNB might abandon the Krone/Euro peg. When asked if that was a possibility he responded: “Of course not.” “The comparison that is made between Denmark and Switzerland I think is somewhat off,” Biltoft said. “I don’t think you can make a comparison between the two cases.”

Mr Jordan’s assurances that maintaining the Franc Euro peg was absolutely essential are conjured when reading Mr. Biltoft’s assertion. After the SNB abandoned the Franc Euro peg, Mr. Jordan said “you can only end a policy like this by surprise. It is not something you can debate for weeks”.

As such, don’t expect the DNB to telegraph any policy change re the Kroner/Euro peg if they decide to abandon it.

Gold vs. the Danish Krone

chart showing gold vs the Danish Krone

Gold has risen sharply against the Danish Krone in recent months.

Danish Gold Repatriation?

According to the DNB, they hold 66.5 tons of gold, most of it stored in London at the Bank of England. To date Denmark has not requested to have its gold returned to Copenhagen, but is content to keep it stored in England knowing there is a Bank of England app that allows them (and anyone else) to take a virtual tour of the bank’s vault to view their gold.

A Danish gold repatriation request may be the only signal provided should the DNB decide to abandon the Krone/Franc peg.

Get Free Updates From

Subscribe to and get the free In Case You Missed Itweekly email as well as updates and analysis on gold, silver, real estate and the economy.

Also get the free report “Twelve Key Differences Between Gold and Silver” when you subscribe.

Subscribe to to receive free silver and gold updates and analysis.

Further Reading:

Swiss National Bank drops the Franc Euro peg

ECB announces its own QE program

ECB Hints at its own QE program

Save our Swiss Gold Initiative Defeated

Citibank Issues Anti Gold Report

Save Our Swiss Gold

The Save Our Swiss Gold Battle Heats Up

Save our Swiss Gold – The Battle Ahead

Support for Save our Swiss Gold Sags

Gold News From Around the World

Gold Reserves By Country

China and Gold

Russia and Gold

Smaulgld Gold Buying Guide

The Importance of Gold to Nations and Individuals

Gold Flows West to East

Gold and Silver Manipulation – Suspected

Silver and Gold Manipulation – Actual

Royal Canadian Mint

Please visit the Smaulgld Store for a larger selection of recommended Kindles, books, music, movies and other items.

You can support by making all your Amazon purchases through the search widget below and by ordering your gold and silver by clicking on the JM Bullion, BGASC, Golden Eagle Coin, Perth and Royal Canadian Mint ads on the site.

Buy American Gold Buffalo Coins

*DISCLOSURE: Smaulgld provides the content on this site free of charge. If you purchase items though the links on this site, Smaulgld LLC. will be paid a commission. The prices charged are the same as they would be if you were to visit the sites directly. Please do your own research regarding the suitability of making purchases from the merchants featured on this site.

Chart Disclaimer: Information presented here has been obtained from a third party and is presented for information purposes only. Smaulgld can not and does not guarantee the accuracy or timeliness of the data displayed on this site and therefor the data provided should not be used to make actual investment decisions. You should always consult a professional investment adviser before investing in precious metals or any type of investment. You acknowledge that Smaulgld assumes no responsibility for the integrity of data on this site.

The content provided here is for informational purposes only. Making investment decisions based on information published by Smaulgld (SG), or any Internet site, is not a good idea. Accordingly, users agree to hold SG, its owner and affiliates, harmless for all information presented on the site. SG presents no warranties. SG is not responsible for any loss of data, financial loss, interruption in services, claims of libel, damages or loss from the use or inability to access SG, any linked content, or the reliance on any information on the site.

The information contained herein does not constitute legal, tax or investment advice and may be subject to correction, completion and amendment without notice. SG assumes no duty to make any such corrections or updates. As with all investments, there are associated risks and you could lose money investing. Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment. SG disclaims any and all liability relating to any investor reliance on the accuracy of the information contained herein or relating to any omissions or errors and as such disclaims any and all losses that may result.

Post Navigation