LONDON Nov 17 A vote in favour of boosting
Switzerland's gold holdings at a Nov. 30 referendum won't
necessarily lift bullion prices, Deutsche Bank said in a note,
adding there was a "considerable" chance the motion would pass.
The Swiss National Bank could spread out its gold buying,
take transactions off market, or use derivatives to cushion gold
prices from the impact of a 'yes' vote, Deutsche said.
The "Save our Swiss gold" proposal, spearheaded by the
right-wing Swiss People's Party (SVP), would force the SNB to
hold at least 20 percent of its assets in gold, make it
repatriate gold held overseas and commit never to sell bullion.
A survey last month said the proposal had 44 percent
support, short of the majority needed to pass into law. A poll
this month showed support had waned.
Gold bulls have flagged the vote as a potential driver of
higher prices, but Deutsche said gold, now 38 percent
below its 2011 record high, would not necessarily benefit.
While the SNB would have to lift its gold holdings by 1,500
tonnes over five years, purchases would amount to 1.2 tonnes per
day, Deutsche said, a "small fraction" of daily turnover.
Some may also be carried out via private transactions with
other central banks, minimising market disruption, it added.
"Another option for the SNB would be using gold swaps to
'window dress' its balance sheet rather than holding physical
gold or futures contracts," it said. The SNB could borrow gold
from counterparties prior to monthly balance sheet reporting
dates, re-exchanging it for currency the next day, it said.
Deutsche Bank said that while a successful gold referendum
would add to the marginal costs of balance sheet expansion, the
SNB would be more aggressive in using other measures to push
euro/Swiss franc away from its three-year old currency cap of
1.20 francs per euro.
Amongst these were the possibility of imposing negative
rates to make the Swiss franc less attractive.
"For markets, the clearest implication is that the
risk-reward for remaining long euro/short Swiss franc remains
intact," the bank added.
The euro fell to 1.20105 francs on Monday, its
lowest since September 2012, triggering talk of intervention by
(Reporting by Jan Harvey and Anirban Nag; Editing by Crispian