Swiss Central Bank Says Gold Referendum is a Bad Idea

The head of Switzerland’s central bank has warned that maintaining stable prices would be harder to achieve if the Alpine country votes to require the bank to keep a minimum amount of gold in its vaults.

The adoption of the so-called “Save Our Swiss Gold” initiative would be a “fatal error of judgment,” Thomas Jordan, president of the Swiss National Bank, told Swiss newspaper 20 Minuten in an interview published Wednesday.

On Nov. 30, the Swiss are scheduled to vote in a referendum on the initiative to make the Swiss National Bank to hold a fifth of its assets in gold, a level it would need to meet within five years. The SNB currently has assets of around $550 billion.

The requirement, the campaign for which is led by members of the right-wing Swiss People’s Party, would also prohibit the bank from selling any of its gold in the future and repatriate gold held overseas.

A recent poll showed the vote was too close to call with 44% of respondents in favor of the initiative, 39% against and 17% undecided. A majority of voters and a majority of Switzerland’s 26 cantons, akin to U.S. states, need to approve the initiative for it to pass.

Mr. Jordan said the proposals would damage the SNB’s ability to deal with inflation, while jobs could be endangered.

“Too little gold in the economic crisis was never the problem, the strong franc was the problem,” Mr. Jordan said in the interview. “We had a massive overvaluation which has led to major problems.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza