Massive gold-buy plan faces Swiss vote
GENEVA – In Switzerland, a campaign is on to protect the country’s wealth by investing in gold – a lot of gold.
The Swiss are being asked to vote on a proposal to make the central bank hold a fifth of its reserves in gold within five years. That would mean buying about 1,500 metric tons of gold worth more than $60 billion.
If the initiative wins the backing of a majority of voters this Sunday, the Swiss National Bank would also be barred from spending any of the treasure, which would have to be locked away in vaults entirely on Swiss soil. The prospect risks causing a spike in gold prices globally.
The nationalist Swiss People’s Party, the country’s largest, has brought the “Save our Swiss Gold” initiative, arguing it will restore trust in the central bank and its paper money. The proposal is opposed by the government and financial leaders but aims to capitalize on a growing sense of caution among the Swiss about the perceived dangers and increasing volatility of financial markets.
Jacques Mayor, a Geneva accountant, said he was wary of the idea of Switzerland buying or selling gold in large amounts in international markets.
“The last time they sold gold, we had an enormous loss,” Mayor said, referring to the central bank going $10 billion in the red in 2013, when the value of its gold holdings slumped.
Despite the perception that gold’s value is protected by the fact it is a physical good, its market price can be quite volatile.
A gold-buying binge could hurt the Swiss economy by reducing the amount of money the central bank has to spend on keeping a lid on the strong Swiss franc. The bank currently intervenes in currency markets to weaken the franc, in order to boost exports and tourism.
Fritz Zurbruegg, a member of SNB’s governing board, said the initiative to buy more gold could therefore disrupt the domestic economy. And the benefits would be dubious: “Gold which cannot be sold in a crisis no longer meets the definition of a reserve and thus offers no security at all.”