The Phaserl


Is The Swiss Gold Referendum Impacting The Price Of Gold

from Gold Silver Worlds:

The “Save our Swiss Gold” referendum is currently making headlines around the world. For those who haven’t followed this story, here’s a short recap [you may jump to the charts below if you are already up to date]: the Swiss will vote on the 30th of November to force the Swiss national Bank (SNB) 1. into increasing Gold reserves to 20% of its balance sheet, 2. to forbid it from selling any of its Gold in the future and 3. to force it to hold all these Gold reserves within the country. What the referendum is really after is to curb the SNB’s rapid expansion of foreign currency reserves (now totalling almost U$500bn, or more than 80% of its balance sheet or circa 75% of the Swiss economy’s national output). In a world of central bank balance sheet expansion and concerns over “fiat” money, this goal may seem a reasonable one. Now consider the historical context. These reserves started to accumulate in the wake of the 2008 financial crisis and during the subsequent Eurozone debt crisis as the SNB attempted to mitigate the Swiss Franc’s “Save haven” status and its rapid appreciation vs the Euro by buying foreign denominated securities. Indeed, from 2007 to 2011 EUR/CHF had dropped almost 40% from 1.60 to near parity pushing Switzerland into recession and deflation (the Eurozone is Switzerland’s largest trade partner representing more than 45% of its exports and 65% of its imports). In August 2011, the SNB introduced a 1.20 floor level on EUR/CHF committing to defend it and triggering a further acceleration of foreign denominated asset purchases. If this intervention cannot go on for ever, it is widely accredited for having put Switzerland back on the growth path.

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