Swiss Gold

·         Switzerland will vote on Nov. 30^th on an initiative that would require the SNB to hold at least 20% of its FX reserves in gold. That would force it to buy some USD 66bn worth of gold or about 1,750 tons over the next five years, equivalent to 13% of annual gold production.

·         I do not think the voters will approve the initiative, and even if they do, I don’t think the cantons will approve it. Thus I do not expect the initiative to pass.

·         If it does pass, it would be a net positive for gold, a small negative for the EUR, and a positive for CHF, although the SNB could still probably hold the line on the 1.2000 EUR/CHF floor.

·         The most interesting point could be the requirement to repatriate the 500 tons of gold that Switzerland holds overseas. That could clear up some mysteries surrounding gold custody.