“On Sunday 30 November, the Swiss get to vote on three things: a ban on the Swiss National Bank (SNB) selling more gold; a move to bring all Swiss gold home from overseas; and a call for the SNB to hold at least 20% of its assets in gold,” says Russ Mould, AJ Bell Investment Director. “At a time when the Swiss central bank is running monetary policy with the main aim of devaluing the Swiss franc, Japan has just increased its Quantitative Easing (QE) scheme and the US and UK are still sat on the assets they have purchased through their QE programmes, this vote could have huge implications for currencies and the gold price alike.”
According to its own data, the SNB has 7% of its assets in gold, 70% of which is already stored in Switzerland. A victory for the “Save our Swiss gold” campaign would force the central bank to either buy 58 million ounces of gold at current prices (CHF 1,125, or $1,169 an ounce) at a cost of CHF 65.5 billion ($68 billion) or shrink its balance sheet and end its QE scheme, probably breaking its peg with the Euro and driving the Swiss franc higher in the process.
Notes for Editors
- According to its own data, the SNB began to sell down its gold holdings in 2000, at the same time as the UK, at prices around $300 (CHF 460) an ounce. Gold today trades at $1,169 (CHF 1,125), well below its $1,923 (CHF 1.616) an ounce peak of September 2011.
- Since then, Switzerland's gold holdings have fallen from over 80,000 ounces of gold to around 33,000 and gold as a percentage of SNB assets has fallen from 33.6% to 7.4%.
- In September 2011, the SNB pegged the franc to the euro at CHF 1.20, driving the currency down by 9% in one day. It has since actively sold the franc and bought foreign currencies in an asset-buying scheme.
- Currencies were backed by gold reserves between 1945 and 1971 when President Richard Nixon pulled the USA out of the Bretton Woods agreement. Since then, currency has had no 'physical' backing.