Swiss Reject Save Our Swiss Gold Referendum

Swiss Voters Hand Swiss National Bank a Blank Check and More Toner for Their Franc Printing Press

The “No” vote on Save Our Swiss Gold is Good For Gold

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Save our Swiss Gold Poll Results

Swiss Reject Save Our Swiss Gold

The Swiss have rejected the “Save Our Swiss Gold” voter referendum that would have required the Swiss National Bank to:

– hold at least 20% of its reserves in gold;

– repatriate of all of its gold currently held outside its borders; and

– ban selling any of its gold.

In our last update before the vote we noted that, after showing initial support in the polls, the referendum was showing the “No” vote pulling ahead. A media campaign in the final weeks by the Swiss National Bank (SNB) and perhaps a “research” note on gold by Citibank was enough to turn the voters against the initiative.

A yes vote supposedly would have been a positive for gold prices because the SNB would have been required to acquire gold in order to meet its reserve requirements of 20%. We noted that if the referendum passed that the SNB may have been able to meet the gold reserve requirement with the assistance of other central banks that might have leased gold to the SNB to avoid or mitigate any upward pressure on gold.

Gold Will Be in the Hands of Private Individuals, Not the Swiss National Bank

Because the Save our Swiss Gold initiative was rejected, it means that the SNB can continue their misguided policy of printing Swiss Francs to buy Euro denominated debt in order to support the Franc:Euro peg of 1.2:1.

By buying Euro denominated debt, the Swiss in effect have been and will continue to be supporting the deficit spending of the Euro zone.

The European Central Bank (ECB) is considering its own round of quantitative easing (QE). If the ECB were to embark in its own QE program, Switerland, unfettered by any gold reserve requirements will have to go along on the disasterous journey and continue to print Francs in order to prevent the Franc from appreciating against the Euro.

Gold rises as a hedge against inflation – defined as an increase in the money supply. The Swiss No vote on the Save Our Swiss Gold vote ensures that the SNB may now continue their Franc printing and, if necessary, increase it unfettered by any gold reserve requirement.

Central banks are committed to positive inflation targets and to defeating deflation. They do this by debasing their own currencies by printing more of them to buy their own debt or the debt of other countries (or to buy other assets, like equities). The Save Our Swiss Gold initiative was designed to prevent the SNB from engaging in that reckless practice.

A “No” vote ensures that the SNB can print Francs in whatever quantity as it wishes.

That is good for the price of gold.