Is A Demand Shock In The Gold Market Coming?

On November 30, Switzerland’s citizens will cast a very critical vote.
Through a referendum, they will vote for or against the Swiss National Bank increasing its gold bullion reserves to 20%, the central bank halting the selling of gold, and the storing of gold bullion in the country. (Source: Kitco News, September 30, 2014.)
If the results are in favor of the referendum, it will mean Switzerland’s central bank will be forced to buy a significant amount of gold bullion.
According to the most recent data from the World Gold Council, Switzerland has 1,040 tonnes of gold bullion in its reserves, equal to only 7.8% of its total reserves. (Source: ‘World Official Gold Holdings,’ World Gold Council web site, last accessed October 16, 2014.) To bring its gold bullion holdings to 20% of total reserves, the central bank of Switzerland will have to buy 1,600 more tonnes of gold, or about 60% of all global mine output this year. Will the gold market be able to handle this kind of demand shock? I highly doubt it.
And if the central bank of Switzerland stops selling gold, a significant amount of gold will come off the market.

This post was published at GoldSilverWorlds on October 22, 2014.