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Swiss Rejection Of Gold Is A Blow To Investors

Recently, Swiss voters reject the plan aimed at forcing the Swiss National Bank to buy gold in a large quantity, giving the financial institution some breathing space as it attempts to protect the national currency from a quantitative easing blitz.

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The Swiss government stated that 77 percent of voters in the recent referendum rejected the proposal to force the central bank to hold 20 percent of its assets in gold.

The price stability was ensured by the credible monetary policy of the Swiss National Bank, according to Finance minister Eveline Widmer-Schlumpf. She also informed that voters agreed with the central bank and government that gold lost its importance long ago as a part of the monetary policy.

Had the voters said yes, the plan would have led to purchase of 1,500 metric tons over 5 years. With the US considering increasing interest rates and the fall of oil prices reducing consumer costs, the demand for hedges against inflation is fading.

Gold lost 16 percent since its March peak, and investors with exchange-traded funds see their holdings on a near five-year low. The approval of ‘Save Our Swiss Gold’ initiative would have increased prices and sentiment by $50 per ounce.

The ‘yes’ campaign faced the criticism that the country offloaded the majority of its gold reserves in early 2000s when the price of the metal went down to a historic low, resulting in a loss of tens of billions of francs.

The radical initiative would have forced the Swiss National Bank to spend CHF 70 billion on gold to bring its reserves to the 20 percent holding mark. And approving the measure may have undermined the effort to prevent the franc from rising against the euro.

At the moment, muted inflation around the world has decreased the attraction for gold investments. Consumer prices in Europe had a slowdown in November, matching a five-year low, simulating the European Central Bank towards expansion of its stimulus program.

The gold purchases made by central banks around the globe have helped the prices, and if it was not there, the precious metal would trade lower.

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Posted by on Dec 2 2014. Filed under Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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