Swiss Vote on 30th Nov for Gold reserve Gold prices consolidated below $1,200 an ounce On Wednesday as investors await the results from the Swiss National Bank (SNB) on the referendum to raise gold reserves. Financial markets are expecting the Swiss referendum on Sunday, November 30, which aims at preventing SNB from offloading its gold holdings and keep it at least 20% of its assets in gold, compared with 8% last month. (International Spot Gold –Daily Chart from since 2009) Global gold prices may surge in the coming week if Swiss voters approve a controversial measure that would force their countrys central bank to keep at least a fifth of its assets in gold. If the referendum Sunday passes and the Swiss government is forced to start beefing up its reserves, the price of gold could jump to more than $1,350 an ounce — an increase of 18%, Bank of America predicts. Spearheaded by the right-wing Swiss Peoples Party, the so-called Save Our Gold law would compel the Swiss National Bank, the countrys central bank, to increase its gold reserves from the current 7.7% to 20% within five years. To do that would require repatriating Switzerlands gold stored abroad and also buying approximately 1,500 tons of gold bullion at prices that have quadrupled since Switzerland began selling off its reserves in 2000. The law would also forbid any future sales of Swiss gold. Currently, Switzerland, with 1,040 tons, is the worlds sixth largest holder of gold and the largest per-capita holder, according to the World Gold Council. The United States has the worlds largest reserves at 8,133.5 tons. A recent poll by Swiss Television and the GFS Institute showed 38% in favor of the referendum, 47% opposed and 15% undecided. Investors apparently are not too bullish about the referendum passing, as gold prices have risen less than 5% in the last few weeks. Still, Sundays vote is setting off alarm bells within the Swiss parliament and among business groups. They argue that forcing the central bank to stockpile gold it cannot sell would diminish the banks ability to set monetary policy and react quickly to changes in the market. In recent years, for instance, the central bank had printed 400 billion Swiss francs ($412 billion), deflating its value against the euro and capping the exchange rate below 1.20 francs ($1.24) to the euro. The central bank took that step to protect Switzerlands economy from the European debt crisis and boost its exports to the European Union, but the Swiss Peoples Party has been critical of the move. To tie the franc to a weak currency like the euro and a weak economic area like the Eurozone is a recipe for disaster, the party claims on its website. Backing up the currency with increased gold reserves, the group argues, would keep the franc strong and the Swiss economy impervious to global financial crises.
Posted on: Wed, 26 Nov 2014 11:00:37 +0000
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