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Swiss Government Says Fixed Gold Reserves Would Handcuff SNB

By Neils Christensen, of Kitco News
Tuesday October 7, 2014 11:55 AM

(Kitco News) - Forcing the Swiss National Bank to increase and hold on to its gold reserves would impede the central bank’s monetary policy, the Switzerland government said Tuesday.

In less than two months, on Nov. 30, Swiss citizens will vote on three initiatives: whether or not the Swiss National Bank should increase its gold reserves to 20%, that the central bank should stop selling its precious metals and that all its gold should be held within the country.

According to Bloomberg, at a press briefing in Bern, Finance Minister Eveline Widmer-Schlumpf continued to urge voters to reject the referendum. “A rigid and unsaleable minimum gold holding would make it difficult for the SNB to fulfill its mandate to ensure price stability and to contribute to the stable development of the economy,” she said in a statement at the briefing.

Both the government and the SNB have opposed the idea of increasing its gold holdings; however, last year the Swiss People’s Part SVP managed to force the referendum after collecting more than 100,000 signatures.

It is still too early to determine how popular this initiative is within the country. The Bloomberg article said that opinion polls will be published later this month.

The article noted that the central bank’s balance sheet has expanded significantly as a result of the financial crisis and currency intervention in 2011, to keep the Swiss franc pegged to the euro at 1.20. According to the article, the SNB held foreign exchange reserves of 462.2 billion franc ($481.8 billion).

In a research note published in late September, UBS said that if the referendum passed, the central bank would have to buy about 1,500 metric tons of gold over the next three years to meet its 20% obligation. The analysts noted that this amount of gold presented about half of the world’s annual production.

According to data compiled by the World Gold Council, for October, Switzerland held 1,040 tons of gold, which represented 7.8% of its reserves. In April of 2013 the Swiss national bank said that about 20% of its gold is held with the Bank of England, 10% is held with the Bank of Canada and the rest is held within the country.

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By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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