Swiss to Hold Referendum on Gold Reserves

April 19, 2013 at 07:07

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Switzerland is to hold a referendum on a popular measure that would ban the central bank from selling its gold reserves and force it to keep at least 20 per cent of its assets in the metal.

Under the terms of “Save our Swiss Gold”, which is led by members of the ultra-conservative Swiss People’s party, the Swiss National Bank would have to repatriate gold reserves held abroad and keep them at home.

Under Swiss law, initiatives that attract more than 100,000 signatures can be put to a referendum. On Thursday, the federal chancellery confirmed that the campaign had gathered 106,052 legitimate signatures.

Cyprus agreed last week to sell gold worth about €400m from its reserves as part of efforts to bring its public finances into order, sending the gold price tumbling on fears that other eurozone countries with debt problems might follow suit.

Governments in the eurozone’s beleaguered southern periphery tend to hold a large part of their total foreign reserves in gold – the Italian central bank holds 2,451 tonnes, more than 70 per cent of its total reserves, while Portugal’s holding of 383 tonnes accounts for 90 per cent.

However, proponents of the Swiss measure flatly reject the idea of sales, arguing that disposals of gold reserves at low prices between 2001 and 2006, as well as more recently, have cost Switzerland billions of Swiss francs.

They insist that the SNB’s gold reserves, which stood at SFr49.5bn at the end of February, accounting for about 10 per cent of its balance sheet, are the best store of value available to the central bank.

“Further gold sales, while both global currencies, the dollar and the euro, are threatening to collapse? No way. Today gold is almost the only really valuable asset left on the SNB’s balance sheet,” according to the website of the initiative.

Backers contend that it would strengthen the position of the central bank, allowing “both Switzerland and the SNB to preserve their room to manoeuvre and independence in the management of monetary policy”.

That view conflicts somewhat with the position of the Swiss National Bank, which views the call with some scepticism.

“We have considerable concerns with regard to the monetary policy implications of the demands in the initiative,” the bank said, adding that it would provide a fuller response “in due course”.

A date for the referendum has not yet been set. However, it is not uncommon for the period between an initiative being accepted for referendum and a vote being held to extend to several years.