2 weeks to Swiss Gold referendum
We are now only 2 weeks away from the Swiss Gold Referendum we discussed earlier here. Latest, more credible polls still have the yes vote slightly ahead. The impacts of the yes vote eventuating cannot be underestimated for the gold market as it would see the Swiss National Bank needing to buy around 1600t of gold, or about 320t a year for 5 years. With annual gold demand around 4000t that equates to 8%. With China continuing to snavel up over half of that same global consumption, India snapping at their heels, solid investment demand, and other central banks still buying up (per our summary of World Gold Council’s 3rd quarter update on Friday) logic would dictate an increase in price. But that is just on a supply/demand front. What about the implications of the message this sends the world? What about the rehash of the German repatriation fiasco with the US when they ask for their gold back? This “small” domestic referendum could have telling international effects, particularly in the gold market. As Andrew Hecht of Technometals had to say:
“The next two weeks are perhaps the most important weeks for the price and value of gold in years. Technical indicators are currently bullish with consecutive key-reversal days on the past two Fridays. Russia and China are buying gold and increasing their reserves. The gold market is tightening up due to a shortage of physical metal. Volatility, both historical and implied, is on the upswing as daily price ranges widen. The lead-up to the Swiss referendum has caused gold prices to move higher along with the value of the Swiss franc, which also put in a key reversal to the upside on Friday November 14.
The vote in Switzerland on November 30 could prove to be a watershed event for the price of gold and the metal's role as a reserve asset for years to come. A "yes" vote on the referendum could have contagious results, causing pressure on other governments to consider similar monetary policies. Gold is on trial on November 30 in Switzerland; a "yes" vote means higher prices, while a "no" vote means a return to the kind of trading action we have seen since [north hemis] summer. Keep your eyes on the Swiss election - the fate of the direction of gold lies in this decision.”