Swiss Central Banker Says Gold Vote Dangerous

Swiss National Bank President Thomas Jordan took to a church pulpit to warn voters that passing an initiative requiring the central bank to hold a fixed portion of its assets in gold risked harming the economy.

“The initiative is dangerous because it would weaken the SNB,” he said yesterday, speaking at a location on a historic hill in the town of Uster, Switzerland. It “would make it considerably harder for us to intervene with determination in a crisis situation and fulfill our stability mandate,” he said.

Switzerland holds a national referendum on Nov. 30 that would require the SNB to hold at least 20 percent of its assets in gold, up from 8 percent currently, and never sell any. A plurality of voters oppose the measure “Save Our Swiss Gold,” though a sizable portion of them were still undecided, a poll published last week showed.

Proponents of the initiative, which would also require repatriation of SNB bullion held in Canada and the U.K., contend boosting the central bank’s gold holdings would help preserve national wealth. They are skeptical about the euro purchases made by the SNB to defend its three-year-old cap of 1.20 per euro on the franc. The SNB’s interventions have caused its balance sheet to expand by more than a third.

Sight-deposits of domestic banks at the SNB rose last week, data showed today, in a sign the central bank may have intervened to defend cap. The SNB, which had previously said it hadn’t had to buy currency to defend the ceiling since September 2012, declined to comment.

via Bloomberg

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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