Support for Swiss Gold Initiative Falls

Zurich-Switzerland (Nov 19)  Support for a Swiss initiative that would force the country’s central bank to increase its holdings of gold fell, according to a new poll released on Wednesday, dimming the prospects it will pass in a vote later this month.

Both gold and the Swiss franc, which have been supported by prospects the initiative could pass, slumped on the news.

The poll, which was conducted by the gfs.bern group, shows 38% of respondents in favor of the Save Our Swiss Gold initiative, down from 44% in an earlier poll. Meanwhile, 47% of respondents said they were against the initiative, up from 39%.

The results come roughly a week and a half before a Nov. 30 vote that could force the  Swiss National Bank  to hold at least a fifth of its assets in gold, forbid it from selling any of its holdings and require it to repatriate gold held at the central banks of the U.K. and Canada. Organizers of the initiative say the measure is needed because the SNB’s three-year-old effort to prevent a rise in the Swiss franc has left its balance sheet stuffed with euros, a currency they say is devalued.

The initiative is opposed by the SNB, the Swiss government and the country’s most powerful business lobby, all of which say its requirements will handcuff the central bank’s policy flexibility.

Analysts estimate the SNB would likely need to buy about 1,500 metric tons of gold, worth roughly 60 billion francs ($62.6 billion) at current market rates, to meet the initiative’s requirement.

Gold slumped on the news, falling 1.6%, or a little more than $18 on the day, to $1,177.40 a troy ounce.

The Swiss franc fell to a one-week low against the euro, to 1.2028 francs, but quickly retraced that move to trade broadly flat on the day. Traders have pushed the franc higher in the run-up to the vote amid speculation the SNB’s resolve to defend a cap of 1.2 francs per euro would be weakened if the initiative passed.

The gfs.bern poll also included results for two other items on the November ballot.

The poll showed voters would likely reject an item known as Ecopop, which would limit immigration to Switzerland, with 56% of respondents against the measure and 39% in favor of it. Passing the initiative has the potential to jeopardize Switzerland’s open ties with the European Union, which are already strained because of immigration issues.

Another initiative that would phase out lump-sum tax payments for wealthy foreigners had better support with 42% of respondents in favor and 46% against.

Source:  WSJ