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Swiss Referendum Could Alter Gold Market

On November 30, the country of Switzerland will vote on a referendum that could have a major impact on the worldwide gold market. The main points of the referendum can be summed up into three points:

  • The Swiss National Bank (SNB) is barred from selling gold bullion ever again
  • At least 30% of Swiss-owned gold abroad must be repatriated to Switzerland
  • Gold must make up at least 20 percent of the SNB’s assets by 2019 (gold currently makes up about 8%)

From about 2000-2008, the SNB sold off more than half of the country’s gold reserves. The “Swiss People’s Party” claim that the SNB was wrong to sell so much gold in the past years, and argues that the referendum will preserve national wealth and enhance the central bank’s ability to act. The SNB opposes the initiative as higher gold holdings could escalate costs for the central bank and lead to losses.

Support for the referendum is closely split with the minority in favor of the initiative. However, if the bill does pass, analysts are predicting a short-term rally for gold prices. In order to meet the requirements of the referendum, the SNB will more-or less always be looking to buy gold – increasing worldwide demand. There could also be a dynamic shift in the value comparison between the euro and Swiss franc. November could be a tense month for currency and bullion investors – so watch out for more news on this issue.

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