As Switzerland rules out that its central bank will be the next big buyer of gold, sending prices to the lowest in more than three weeks, there’s one more reason for investors to be bearish.
Voters yesterday rejected a referendum requiring the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold. Had it been approved, it would have led to purchases of at least 1,500 metric tons over five years. With lower oil prices reducing costs for consumers and the U.S. considering raising interest rates, demand is fading for hedges against inflation such as gold.
Gold has lost 19 percent since peaking in March and investor holdings of exchange-traded products are near a five-year low. While prices probably won’t be affected too much by the “no” vote of the initiative called “Save Our Swiss Gold,” approval would have improved sentiment and increased prices by as much as $50 an ounce, HSBC Holdings Plc estimated in November.
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