Sunday 30 November 2014 tomorrow Swiss citizens will vote for three types of referendum, which is the minimum amount of the Swiss central bank gold reserves (the Swiss National Bank or SNB), improving the system of taxation and restrictions on the number of immigrants. Which we will discuss here is about the SNB's gold reserves (gold referendum in Switzerland). Referendum under the title 'Save Our Swiss Gold' was initiated by Luzi Stamm, vice president of the Swiss People's Party (SVP).
The contents of the referendum are:
1. The SNB should save 20% of its total assets in gold.
2. All the Swiss government's gold stored in foreign central banks to be pulled back (in-repatriation) and stored in the territory of Switzerland, including the now stored at the Federal Reserve Bank of New York.
3. SNB must commit to no longer sell gold.
Choice voting is agreed (yes) or disagree (no).
From the results of the poll until 18 November last, yes option turnout of about 30%, voters option no more than 60% and the rest do not make a choice (Undecided). However, the results of these polls do not reflect the results of the referendum aklhir. The results are expected early voting could have known Sunday around 13:00 Swiss time, and the final results will be announced Sunday night. The number of voters who have a big impact is expected to come from two main cities Geneva and Zurich.
Influence the results of the referendum on the price of gold, currency CHF and EUR
- If yes option wins:
Gold:
Victory yes option means the SNB will accumulate as much as 1,500 tonnes of gold reserves up to 5 years, and is expected to cause a spike in gold prices, but will come back drop if it is not clear how Switzerland raise the amount of gold reserves. If the option yes win means the SNB will return to the gold standard to maintain the exchange rate of CHF, and every time the SNB will intervene in the exchange rate of its currency will buy gold to ensure the amount of reserves still 20%. This will certainly memyebabkan rising gold price volatility.
Currency CHF and EUR:
As is known since 6 September 2011 the SNB has set the exchange rate against the EUR at 0.8333 CHF or EUR / CHF = 1.2000, to limit the strengthening of CHF to EUR continuous. The SNB will maintain the value of pegging it as it has become one of the monetary policy. Victory yes option will cause CHF rose on its reputation as one of the safe-haven currency will be lifted. If this is the case is expected SNB will soon take action to weaken the CHF back, among others, by lowering the interest rate to a negative number (the current interest rate SNB has approached 0.0%).
Victory yes option will also have an impact on the currency EUR. SNB keep the majority of its assets in asset-currency EUR to maintain pegging the value of the EUR / CHF = 1.2000. SNB will sell EUR to increase its gold reserves, and this is certainly going to suppress the exchange rate EUR.
- If no options are winning:
Gold:
The victory of the no option will result in the price of gold dipped on Sunday night or Monday morning Swiss time by sentiment cancellation of planned purchases of gold by the SNB. It is estimated that the shock is only temporary, but we will not know for sure until the level of how the gold price will go down.
Currency CHF and EUR:
EUR / CHF CHF will be strengthened or weakened. Estimated impairment of CHF is also only temporary because the SNB will return to intervene in order to maintain the value of pegging EUR / CHF 1.2000.
Source: www.forex.com: Swiss gold referendum: what does this mean for EURCHF?
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