Tuesday, October 28, 2014

Swiss Referendum on Gold Coming Up in November

On November 30th, the people of Switzerland will vote on a referendum (the Swiss Gold Initiative) to rebuild official gold reserves of the country and prevent the future sale of gold reserves. The first poll out on this indicated that the referendum would be supported by a margin of 44% For and 39% Against (17% Undecided). We will follow this to see how it turns out.

This vote is attracting a lot of attention around the internet, especially on sites that are advocates of hard assets like gold. According to supporters like Egon Von Greyerz, the initiative would do these three things:

- demand that the Swiss gold held abroad in the UK and Canada be physically returned to Switzerland (an estimated 300 tons of gold)

-require the Swiss National Bank to hold 20% of its balance sheet in physical gold (an estimated 1600+ tons of gold that could be purchased over a five year time period)

-restrict any future sales of gold reserves

Not surprisingly, the banking establishment in Switzerland is opposed to the referendum. The early poll indicating support for the referendum is therefore somewhat of a surprise and it is expected this will be a strongly contested vote. 

In this interview with King World News, well known CNBC analyst Rick Santelli predicts the referendum will pass despite the opposition from the international banking community. Advocates of the referendum believe that passage will have an immediate impact on gold prices. Santelli says to watch the gold price two weeks ahead of the vote to get an inidication of whether or not it will pass.

The Wall Street Journal says the vote is "too close to call" while Reuters runs an article emphasizing that the initial poll fell short of the 50% needed to pass. Both these articles suggest the measure will probably fail. So you can see how various media spin these things depending on what outcome they prefer to see.

This Forbes article points out that even if the referendum does pass the national vote, it still has to be passed in a majority of 26 Swiss Cantons. Something the Forbes article says will be very difficult.

So, we will follow it to see if it passes and if it does impact the gold market. If it is likely to pass we should see some signs of that by mid November in the market price for gold.

Update 10-30-14: Here is an article from TheStreet.com on the upcoming vote.

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