In
today’s Swiss gold referendum, roughly 78% voted against expanding
central bank gold reserves to 20% of central bank assets from the
current 7%, according to Swiss national broadcaster SRF.
The vote is a blow to the movement to “Save Our Swiss Gold” that had
the hopes of moving Switzerland back toward a gold standard which the
country left in 1999. Since then, there has been no requirement for the
country’s currency to be backed by gold and as a result central bank
gold reserves have waned considerably. The referendum results are not
surprising given earlier polls had predicted the “no” camp would win by a
large margin, however the results have mitigated concerns that
increased demand from the Swiss National Bank (SNB) could cause a spike
in gold prices. Despite the criticism of easy monetary policy within the
“Save Our Swiss Gold” movement, to maintain the current exchange rate
floor on the Swiss franc against the euro, there is mounting pressure on
the SNB to lower interest rates into negative territory on par with the
ECB that lowered its key deposit rate into negative territory back in
June.
Thomas Jordan, president and chairman of the Swiss National Bank (SNB) (Photo credit: Bloomberg News).
Ahead of the gold vote, Swiss National Bank (SNB) president Thomas Jordan commented that the popular vote on requiring the central bank to keep 20% of its assets in gold would hinder the central bank’s ability to conduct monetary policy. In a statement obtained by the Wall Street Journal, Jordan said that “The initiative is both unnecessary and dangerous”, saying further that “It is unnecessary because, under the current monetary order, there is no link between price stability and the share of gold in the SNB balance sheet.” Jordan also pointed out that Switzerland’s stock of gold is high compared with other central banks and that the SNB has no further plans to sell or purchase gold in the future.
Gold standard backers upset with the result
The organizers of the initiative, members of the Swiss People’s Party, say the gold reserve measures were needed because the SNB’s policy of capping the value of the franc has left its balance sheet with a surplus of euros which have been devalued in the wake of the financial crisis. They also have been vocal against the devaluation of the Swiss franc, which is intended to help Swiss exporters and the Swiss economy.
Former U.S. presidential candidate and former congressman Ron Paul, who is also a well-known gold standard backer, came out in favor of the Swiss “yes” camp on expanding central bank gold reserves ahead of the vote, saying in an opinion piece on his website, “The Swiss people appreciate the work their forefathers put into building up large gold reserves, a respected currency, and a strong, independent banking system. They do not want to see centuries of struggle squandered by a central bank”.
http://www.forbes.com/sites/jonhartley/2014/11/30/swiss-voters-reject-increasing-gold-reserves-in-referendum/
