The market never stand still. It moves up and down from day-to-day. November 30, 2014 is a day that can move the gold market forever. The Swiss people will vote on a referendum that`ll refresh the country`s centuries-long affinity for gold and restrain paper money.
According to Switzerland`s first opinion poll, some people in the country said they will increase and hold on to their gold reserves. Switzerland`s biggest daily newspaper, 20 Minuten, released this week the results of its online survey.
45% said they would support the initiative, but it also showed a high number of undecided voters. Some analysts say it is a clear victory for the «yes» side.
Swiss Central bank sold about half of its gold reserves in 2000 – 2003. Like the Bank of England, they sold the gold at the bottom price of $200 an ounce. Until then, Switzerland used to have the highest gold reserves per-capita in the world.
Switzerland holds about 1,040 tons of gold in reserve, and that`s 7,7% of the central bank`s assets. If the people in Switzerland vote yes, it will have a widespread effect.
For Switzerland it would be to hold the gold and not sell any more in the future, repatriate all their gold from overseas and require that at least 20% is physical gold bullion.
Many people still belive that gold is the foundation of a strong currency. Switzerland will be the first country this century to restrict the central bank`s ability to print money and expand government, but the gold market will be the first to feel the tremors. Analysts at UBS predict that Swiss need to buy about 1,500 metric tons of gold the next three years. It will cost the central bank between $67 and $83 billion. Last year, China purchased 1,176 metric tons of gold, according to China Gold Association. It`s not small amounts!
Barclays said that the supporters of the referendum face a difficult opposition. The Swiss National Bank and the Swiss government have been urging people to vote against the referendum, because it would impede the bank`s monetary policy.
Many people aren`t happy that the central bank has expanded its balance sheet to weaken its currency and stimulate growth, and many belive that debasing the currency is not a sound economic policy, but there is no evidence that a weak currency leads to long-term economic growth.
You can increase your export and benefit from that with a weaker currency, but does that outweigh the weaker purchasing power on imports? November 30, 2014. Mark that day in your calendar.
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