If a Swiss referendum passes, net central-bank gold purchases likely would increase substantially from recent years, says Societe Generale. Switzerland will vote on a referendum on Nov. 30 that would do several things, including a requirement that the central bank hold 20% of its official reserves in gold. The central bank has held 1,040 metric tons since 2008, SocGen says. “At the end of 2013, gold made up 7.4% of the Swiss National Bank’s official reserves, which was the lowest level of gold’s share of official reserves since the IMF (International Monetary Fund) began collecting data in 1948,” SocGen notes. Should the referendum pass, the price will determine how much gold the SNB has to buy. At $1,000 an ounce, and assuming other official reserves remained flat from end-of-2013 levels, the central bank would buy a little more than 2,800 metric tons. At $1,500 gold, the central bank would buy just over 1,500 tons, SocGen continues. Sales would likely occur over a multi-year period. Since 2010, global central banks have been net buyers of between 77 and 500 tons annually. “If the SNB were to begin a multi-year gold-buying program, net purchases could increase significantly from levels seen in the past few years,” SocGen says. “To provide some context, if the SNB were to buy 500 metric tons of gold per annum for three years, this would amount to 12% of total supply and 10% of total physical demand in 2013.”
