Swiss voters rejected a referendum requiring their central bank to hold a portion of its assets in gold, a measure President Thomas Jordan termed an “invitation to speculators” that could have hurt the economy. Bullion fell to a three-week low.
The “Save Our Swiss Gold” proposal stipulating the Swiss National Bank hold at least 20 per cent of its 520 billion franc ($636.6 billion) balance sheet in gold and never sell any bullion, was voted down by 77 per cent to 23 per cent. Polls had forecast the rejection. Two other initiatives on tax privileges for foreign millionaires and immigration limits were also rejected.
SNB warned repeatedly the measure, which also required the 30 per cent of central bank gold stored in Canada and Britain to be repatriated, would have made it harder to keep prices stable and shield the bank’s cap on the franc of 1.20 per euro. That minimum exchange rate was set three years ago.
“The key word is relief, but it’s not a reason to crack the champagne corks yet,” said Janwillem Acket, chief economist at Julius Baer in Zurich.
Due to the rejection, “the SNB has more options and fewer constraints on monetary policy”, he said. The SNB was “pleased with the outcome”.
Gold for immediate delivery sank up to 2.1 per cent to $US1142.88 an ounce. Gold has lost 4.1 per cent this year as the dollar strengthened and investors cut holdings in exchange-traded products.
Investors anticipating more easing by the European Central Bank helped push the franc to a 26-month high against the euro last month. ECB President Mario Draghi has explicitly cited government bond-buying as a possible policy tool. That could cause further appreciation pressure on the Swiss currency.
“The result may be interpreted as a vote of confidence for the SNB and thereby strengthen the credibility of the floor,” said Beat Siegenthaler, currency strategist at UBS Group AG in Zurich.
Referendums are a key feature of Switzerland’s system of direct democracy. The gold initiative was launched by the Swiss People’s Party (SVP). Uneasy about the more than €100 billion the SNB held, they contended their initiative would strengthen not weaken, the central bank’s credibility.
The SNB’s assets have increased by more a third in the wake of its setting the cap in September 2011 amid the euro area’s debt crisis. It holds 1040 tons of gold, about 8 per cent of its assets. The Swiss already have the world’s most bullion per head.
Schweizerische Nationalbank
