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Swiss Gold Initiative Faces Tough Hurdles Despite Positive Early Polls

By Neils Christensen of Kitco News
Monday October 27, 2014 3:38 PM

(Kitco News) - Some analysts continue to dismiss a fast-approaching Swiss referendum on gold reserves, despite two recent polls showing nominal support for the initiative.

On Friday gfs.bern, in partnership with SRG, Switzerland’s public broadcasting organization, released a poll saying that 44% of respondents supported the “Save Our Gold” initiative. The referendum would force the Swiss National Bank to boost its gold reserves to 20% of its total foreign reserves, to never sell its gold holding and hold all its gold within the country. The poll showed 39% opposed the referendum, and there is still a high number, 17%, who are undecided.

The gfs.bern/SRG poll followed an earlier survey last week from 20 Minuten, Switzerland’s biggest daily newspaper, that showed between 45% and 39% of respondents said they would vote “yes” in the referendum.

Although the “yes” camp has shown consistent support in the early days of polling, analysts pointed out proponents still lack the majority needed to pass the referendum. Not only does the referendum have to gain the popular vote, but it has to pass in a majority of cantons, which represent the different regions in Switzerland.

According to Reuters, the authors of the 20 Minuten survey said they expect opposition to eat away at the support for the gold referendum. Both the Swiss Government and the Swiss National Bank have voiced their opposition to the initiative, which was spearheaded by the Swiss People’s Party in April 2013.

In early October, Finance Minister Eveline Widmer-Schlumpf said fixed gold reserves would impede the central bank’s monetary policy and make it difficult “to fulfill its mandate to ensure price stability and to contribute to the stable development of the economy.”

In a note published Monday, Barclays Capital reaffirmed their base case is for the referendum to fail as there are significant hurdles that will have to be passed.

Analysts at Bank of American Merrill Lynch agreed, saying it is unlikely the vote will pass.

“Despite poll results showing a small lead for the initiative’s supporters, the hurdle for success is high, with no meaningful support from any of the main parties,” the analysts at BAML wrote in a report released Friday.

BAML think it is unlikely the vote will pass, they also noted in their report that if it does pass, the initial market reaction could boost gold prices to $1,350 as investors and traders will anticipate the long-term buying from the Swiss National Bank.

“Given the size of the current balance sheet, initial buying would amount to (about 1,500 metric tons) of gold, spread over five years,” they said.

Chris Weston, commodity’s analyst at IG Markets said the market’s lack of reaction to the early polls is a strong indication that participants aren’t taking the Nov. 30 vote very seriously.

“I think if this vote actually had a chance of passing we would see gold prices much higher right now,” he said.

Related Stories:

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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