Gold price drops as Swiss vote no
The gold price dropped to a three week low, as the Swiss population voted overwhelmingly against the proposal to force the Swiss National Bank (SNB) to boost its gold reserves, the initiative was rejected by 77% to 23 %.
The referendum, which would have forced the SNB to stock up its gold reserves from 8% to 20% of central bank assets, would have forced the bank to purchase half of the world’s annual gold mine output. The outcome of the referendum lead to an immediate 2.1% drop of gold prices, which in turn triggered a decline of other commodity prices.
The initiative, proposed by the Swiss nationalist Swiss People’s Party was criticised by SNB president Jordan, who warned that the gold purchases would restrict the SNB’s ability to intervene in order to maintain the cap on the exchange rate of the Swiss Franc against the Euro.
The SNB introduced the cap in 2012 to prevent further appreciation of the Franc, as a result of subsequent Euro purchases, its balance sheet has been extended by a third. Following on from the referendum, the price of the Swiss Franc remained stable against the Euro.
The central bank responded to the outcome of the elections: “ The SNB has a constitutional and legal mandate to conduct monetary policy in the interests of the country as a whole. It is charged with ensuring price stability while taking due account of the development of the economy. “
“An acceptance of the initiative would have severely constrained the SNB in fulfilling this mandate. With conditions unchanged, the SNB can now continue pursuing its monetary policy geared towards price stability. In the current situation, the minimum exchange rate against the euro remains the key instrument for this purpose”.