As expected, Swiss voters rejected a proposal Sunday to increase the Swiss National Bank (SNB) gold holdings to a mandatory 20 percent of its foreign exchange reserves. The “Save Our Swiss Gold” proposal was voted down by 77 percent to 23 percent which was a larger margin than what polls had indicated.
The SNB had campaigned against this referendum initiated by the European Union-skeptic right wing Swiss People’s Party which falsely argued that this would have strengthened the SNB’s credibility. The SNB is quite relieved about the outcome as it allows more flexibility to their reserve management.
So how did the markets react? After the announcement, gold plunged another 2% after a steep decline on the Friday after thanksgiving. It seemed like the market was pricing in the referendum rejection as it has been the several weeks prior as the gold bull’s “Hail Mary” was looking bleaker and bleaker.
However on Monday the markets reversed course and spot gold closed up 4% to $1216/ ounce the best one day gain since 2013. Traders have called Sundays vote as a potential pivot point that could turn around the gold market as the idiom goes “ buy the rumor, sell the news”.
Also recent curbs on gold imports by India are projected to increase demand. Furthermore, last week’s plunge in oil has caused firms to increase margin in oil as well as other commodities which was a great excuse for shorts to bank their profits.
This article was written by Treesdale Partners, portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR), AdvisorShares Gartman Gold/British Pound ETF (GGBP), AdvisorShares Gartman Gold/Yen ETF (GYEN) and AdvisorShares International Gold ETF (GLDE).