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Swiss gold referendum at end of November could start prices heading to the moon

 -- Published: Thursday, 9 October 2014 | Print  | Disqus 

By Peter Cooper

Switzerland is holding a referendum on gold on November 30th that could transform the outlook for gold prices. If it passes it will mandate the central bank to hold a minimum of 20 per cent of foreign reserves in gold against 7.7 per cent today, stop its gold sales and repatriate all Swiss-owned gold.

Pegging the Swiss franc to the euro has come at a high price in terms of house price inflation and there is a national concern about runaway monetary policy taking hold. Switzerland has always been one of the most conservative nations in Europe as well as the richest.

Gold sold off

However, its central bank sold off 60 per cent of Swiss gold reserves in the 2000s. In order to beef up its gold reserves to 20 per cent of foreign exchange reserves experts say Switzerland would need to buy 500 tonnes per annum for the next three years.

The impact of central bank buying on that scale would have a marked effect on the price of the yellow metal. Who would be be next? Some other central banks from small, rich countries? The UAE as the Switzerland of the Middle East perhaps? Would every billionaire on earth want his or her own private stash?

Often it takes such a landmark event to get markets moving and the gold price has been so manipulated down by central bank collusion that it would not really be such a surprise if it took one of them being forced to break ranks to really get the price heading to the moon.

Many analysts will tell you gold should be at least three times higher in price than it is today because of this manipulation. Take it off and the elastic band will snap back with a surge to much higher prices. $3,500 an ounce would only be the first stage of this rocket.

Price rebalancing

It is simply a rebalancing of global asset prices to account for inflation that is long overdue. By getting there first the Swiss would benefit most, and that fact will not be lost on voters in the referendum on November 30th either.

They may not listen to the protestations from their finance minister and central bankers about the possible adverse consequences and instead trust in their instincts that gold is real money and a country as rich as Switzerland ought to have a gold-backed currency.

That is what Switzerland will be voting about on November 30th.


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 -- Published: Thursday, 9 October 2014 | E-Mail  | Print  | Source:

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