Gold News

Gold Price Drops $20 on Swiss Gold Vote "No" Opinion Poll

GOLD PRICES sank 1.7% late in London trade Wednesday, erasing most of the last week's gain as the latest opinion poll of the upcoming Swiss referendum put the "Yes" camp well short of a majority.
 
Prompted by a petition under Switzerland's "direct democracy" rules, the referendum will on Sunday 30 November ask voters whether the country's central bank should boost its gold holdings to 20% of reserves from the current 8%.
 
The Swiss National Bank could then neither sell gold in future, nor store any of its holdings – likely swollen from 1040 tonnes today to nearer 2,500 or more – outside the country.
 
"The recent recovery in gold prices stalled on Tuesday," says a technical chart analysis from Swiss bank and London market maker UBS, pointing to "resistance at $1207.95" – the 62% retracement of the last 6 weeks' drop.
 
"Now, we expect the bearish trend to resume."
 
Gold prices dropped $20 per ounce within minutes of the opinion poll being released.
 
Conducted by survey group gfs.berne for the SRG television station, it said only 38% of respondents plan to vote "Yes" to the gold question on next week's referendum.
 
All initiatives need over 50% to pass, with a majority of Switzerland's regional cantons required as well. Having ignored the approaching ballot's implications for central bank gold demand, a growing number of analysts have recently said it could spike prices, even turning around the metal's 3-year downtrend.
 
Further out, and regardless of the Swiss result, analysts at Standard Chartered today raised their gold price forecasts, targeting a rally to average $1245 in 2015 and then $1330 the year after.
 
"The current backdrop for gold prices," says the note, "is one the weakest ever because of the multiplicity of factors supporting a bearish view.
 
"However, we see the tide turning...most particularly [because] Dollar bullishness will likely fade."
 
With notes from the US Federal Reserve's most recent policy meeting due out later on Wednesday, the US Dollar today hit fresh 7-year highs against the Japanese Yen, but retreated from an earlier rise vs. the Euro to touch this month's low at $1.2570 for a third time.
 
World stock markets meantime rose, while US Treasury bonds fell – edging yields higher – and industrial commodities bounced 0.5% but grains slipped amid the ongoing record US harvest.
 
Gold's price rally through $1200 on Tuesday was "probably due to the covering of short positions" by bearish traders, reckons Germany's Commerzbank.
 
"We didn't see much," says Swiss refinery group MKS, "in the way of Chinese physical demand to support the market today."
 
Today's opinion poll on the Swiss gold vote also said the other two initiatives put to the electorate on 30 November, to reduce immigration and tax wealthy foreigners more heavily, look set to fail as well.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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