Swiss Franc Rises Before Gold Referendum

The Swiss franc drifted higher against most major currencies in European deals on Wednesday, as traders await a Swiss vote on whether to force the Swiss National Bank to increase its gold reserves, which will be held on November 30 .

The voters will decide on whether to amend their country’s constitution on an initiative entitled ‘Save our Swiss Gold.’ If the gold initiative passes, the Swiss National Bank should boost its gold reserves to at least 20% of its holdings, nearly three times more than the current level of seven %.

The bank will be prevented from selling its gold, and would require to repatriate reserves held in Canada and Britain to ensure that all of its holdings of the precious metal are stored within Switzerland .

Investors are concerned that an “yes” result would curtail bank’s ability to sell gold, and if it wants to buy euros to defend the floor it would likely need to buy gold in the same proportion. Economists are warning that such an outcome could force the SNB to turn to other unconventional methods to cause fall in the value of the franc, like negative interest rates.

The franc rose to a record high of 122.68 against the yen from yesterday’s closing value of 121.92.

via Kitco

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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