A number of readers have asked me to comment on the Swiss Gold Referendum and what it may mean for the price of gold. Let’s start with a recap of the of the three primary points that citizens in Switzerland will vote on.
Switzerland Gold Initiative
Halt all gold sales Repatriate Swiss gold held in foreign vaults (UK and Canada) Establishes minimum 20% level of Swiss National Bank (SNB) Assets Of course, central bankers everywhere are horrified by the idea they should have to do anything, especially hold sound assets. In a flurry of fearmongering it appears the initiative is headed towards defeat.
Polls aside, let’s play a bit of “What If?”
Specifically, what will happen to the price of gold if the referendum passes?
Spanner in the Works
Variant Perception says Swiss Gold Referendum: A Spanner in the Works.
As polls continue to swing around ahead of the Swiss gold referendum on 30th November, we expect increased volatility in the FX and gold market.
After the implementation of the EURCHF floor, gold’s share of the SNB balance sheet has fallen to 7.5% from around 30% in 2007 (top chart) [SNB Balance Sheet]. The SNB has already pointed out the untenable nature of the peg should the referendum pass, but the impact on the gold market would also be significant.
This post was published at Global Economic Analysis on November 16, 2014.