A ‘no’ vote in the Swiss gold referendum on November 30 could lead to rapid liquidations of positions by investors, HSBC said.
On Sunday, voters in Switzerland will decide whether or not to outlaw further gold sales from the Swiss National Bank, to make physical bullion at least 20 percent of the bank’s assets and whether to repatriate Swiss-owned gold.
But support for the ‘Save our Swiss Gold’ initiative appears to be slipping, with the latest poll having the ‘yes’ vote at 38 percent, with 47 percent against and 15 percent undecided.
The results of the poll, conducted by research institute gfs.bern and Swiss broadcaster SRG, are in line with a previous poll by news organisation 20 Minuten, which said that public support for the ‘yes’ vote had fallen to 38 percent from 45 percent.
“The bulk of opinion in the market appears to favour a ‘no’ vote and although a rejection of the provision by voters would not be surprise, it could deal a modest psychological blow to the market and help reaffirm the bear trend in prices,” HSBC said in a report on Tuesday.
“[But] we believe a “no” vote is priced in by the market and would not expect a significant impact on gold prices,” it added.
The spot gold price has risen to around $1,200 per ounce from four-year lows just three weeks ago at $1,131.60 – a rise that has in part been attributed to the Swiss referendum.
But the bank does not believe the recent rally is tied to the referendum, instead attributing the recent gains in the market to increased purchases in emerging markets where price-sensitive consumers are responding to lower prices.
On the other hand, the impact of a ‘yes’ vote on the market could be “notable”, HSBC said, because it would force forced the Swiss National Bank to buy nearly $60 billion of gold at current spot prices to raise its holdings to 20 percent from around 7-8 percent at present, according to World Gold Council statistics.
“It would also be a strong signal in support of the utility of gold and may help galvanize the bullion market,” it added.
Switzerland has 1,040 tonnes of gold in its reserves and would therefore need to buy another 1,500 tonnes of metal to bring gold holdings up to 20 percent of its assets, a figure that is “roughly equivalent to all of China’s gold consumption for 2013 [and would] also equate to about half of annual global mine output”, the bank said.
“While the SNB has five years, according to the referendum, to complete the purchases, the market would factor the increase in demand in immediately,” it added.
But with the gold market having trended lower since April 2013, when the 100,000 signatures needed to bring the issue to a referendum were amassed, HSBC finds it ” difficult to believe that investors are seriously worried the referendum will pass. This could change, however, as the date for the referendum nears, as we could see precautionary buying.”
(Editing by Mark Shaw)