Swiss Yes Vote Possible - First "Gold Rush" Of 21st Century?

November 27, 2014

There are just 3 days left until the “Save Our Swiss Gold” referendum this Sunday. On November 30, voters in Switzerland will head to the polls to decide whether the Swiss National Bank (SNB) should back the Swiss franc with gold by increasing its gold holdings to 20% - up from current levels of 7%.

1 kilo swiss gold

The conservative Swiss People's party proposed the initiative, called "Save Our Swiss Gold", with the intention of boosting the security and financial and monetary independence of Switzerland in these times of financial uncertainty. They believe that a 20% gold holding will protect the Swiss people from currency debasement, currency devaluation and an international monetary crisis.

In the case of a "yes" vote, gold prices are likely to surge. Analysts do not believe a yes vote is possible. However, analysts have got the mood of the people wrong in many referendums both in Switzerland and throughout Europe in recent years. 

We believe that the vote will be very close - much closer than many analysts suggest. After a massive, very well-funded and highly coordinated campaign by the banking and political establishment in Switzerland, the polls show that the no side is in the lead. 

It is worth remembering some of the recent referendums in Switzerland showed the people would vote with the government and establishment political parties in the polls. Subsequently, they did not.  

It is worth remembering some of the recent referendums in Europe showed the people would vote with the government and establishment political parties in the polls. Subsequently, they did not.  

In Ireland, after similar coordinated campaigns by political elites, many official polls showed, the people would vote for the EU's Lisbon and Nice treaties. The people voted for neither.
There is a lot of discontent and anger against financiers and a sense that politicians are mere tools of bankers and financial elites rather than representatives of the people, doing the will of the people.

The Swiss people are better off than most people in the world and Switzerland remains one of the wealthiest nations in the world. 

However, many are struggling in Switzerland today. The working and middle classes are seeing significant inflation in the cost of life's necessities in the form of food and accommodation. To buy or to rent an apartment or house is becoming increasingly unaffordable.

Much of the campaign conducted by the SNB and the political parties in Switzerland was alarmist and one sided. It failed to address the concerns about the possible continuing debasement of the Swiss franc and a resultant fall in Swiss people’s purchasing power and standard of living.

Today we have published a very good, balanced look at the key issues which were largely ignored and not addressed by the no campaign.

The author Eric Schreiber is the former head of commodities UBP and former head of precious metals at Credit Suisse in Zurich. He believes that this crucial angle has been largely missing from the Swiss gold referendum debate as have important matters regarding the role of central banks, the importance of transparency, accountability and indeed democracy.

Read Eric’s interesting and balanced article here

Central bankers reached a new low at the weekend when Swiss National Bank President Thomas Jordan warned in a very alarmist manner of "disastrous consequences" from a pulpit in a church on a historic hill in the town of Uster, Switzerland.

“The initiative is dangerous because it would weaken the SNB,” he said yesterday regarding proposals to increase the Swiss gold reserves, at a memorial service in a church which Bloomberg dubbed the 'sermon on the hill.'

The separation of church and state was one of the great achievement of recent years. It looks like we need to see a proper separation of central banking from the state. States and sovereign nations should be in control of central banks, rather than the other way around.

Central bankers, with their dogmatic uber-Keynesian money printing creed, would like to see themselves and their policies as infallible. Despite, such policies having an abysmal track record throughout history and indeed in recent years.

Central bankers seem to have forgotten that their primary role is to protect the purchasing power of their respective currencies and to act as the lender of last resort. 

Their role is not to bail out irresponsible, insolvent banks and not to boost asset prices on behalf of corporations and the wealthy - thereby, debasing sovereign currencies.

My sense is that the Swiss people may give the politicians another bloody nose this Sunday. This would shock markets as market participants are not expecting this. It would force the Swiss central bank to triple reserves to over 1,500 metric tonnes, leading to the price of gold soaring.

It would lead to an even greater increase in central bank demand for gold. It would put the FED, ECB, BOJ, and BOE on notice that their continuing currency debasement is not sustainable.  It would also likely break the EURCHF peg increasing purchasing power for ordinary people in Switzerland. 

A yes vote would likely result in a significant shift in both awareness and consciousness about our modern fiat monetary system and about what constitutes money today. The frequently cited, but never seen except in India and China, ‘gold rush’ of recent years may materialise in the western world as gold goes from the fringes or a small minority of risk averse investors and savers to the mainstream.

It would result in a new found awareness that gold is not the speculative, volatile commodity but is a rare, finite form of money and a store of value in uncertain times. 

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MARKET UPDATE

Today’s AM fix was USD 1,196.50, EUR 959.20 and GBP 758.96 per ounce.
Yesterday’s AM fix was USD 1,195.75, EUR 960.67 and GBP 760.22 per ounce.

Spot gold closed slightly lower yesterday at $1,197.78/oz, and spot silver fell to $16.51/oz.

gold in USD 10 years

Gold in USD - 10 Years (Thomson Reuters)

Gold prices are in lockdown just below $1,200/oz as the market awaits Sunday’s Swiss referendum on central bank gold reserves (see above). 

Gold edged down on Thursday, pushed by dollar gains and the lull of the Thanksgiving holiday in the U.S. 

Traders remain cautious ahead of the Swiss gold referendum this weekend. Gold coin and bar buyers in western markets have been buying this week in anticipation of a possible yes vote.

Silver was down 0.6%  at $16.37 an ounce, platinum was down 0.3% at $1,219.30 an ounce and palladium was down 0.6% at $795.47 an ounce.

A surprise dip in Spanish consumer prices has increased the probability that the ECB will embark on a more aggressive easing of monetary policy. However, in Germany the jobless rate remained low at 6.6%, matching the revised number for the previous month.  

Euro zone countries' economic fortunes could permanently diverge if they fail to undertake structural reforms, posing a risk to the cohesion of the currency bloc, the president of the ECB said today. "Lack of structural reforms raises the spectre of permanent economic divergence between members," Mario Draghi said.

Traders are now awaiting Sunday's Swiss vote on how it manages central bank gold reserves for guidance. If a 'yes' vote is passed, the Swiss central bank would have to buy about 1,500 tonnes of gold over the next five years.

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Courtesy of http://www.goldcore.com/

Mark O'Byrne is executive and research director of www.GoldCore.com which he founded in 2003. GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth. 

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