Accountability. It’s something that’s expected out of all of us – in our careers, in our relationships, in our own financial undertakings. But when it comes to monetary policy, accountability is not a mindset governments are prone to embrace without a good fight. And that’s the situation that the government of Switzerland and the SNB (Swiss National Bank) currently finds itself in.
On November 30th, the Swiss people will have the opportunity to vote on increasing their gold reserves from the current 7.8%, to 20%. What the Swiss are effectively demanding of their government is the same accountability that is demanded by governments of its citizens. When governments freely create currency out of thin air to finance government programs, they’re diluting the value of the currency the citizens of that country earn and hold, creating an inflationary environment. By having a currency increasingly backed by gold and mandating that its level be maintained at or above 20%, politicians are restricted in their ability to create debts to fund new programs. The result is an environment of price stability, and low inflation, while handcuffing politicians’ ability to spend frivolously. And currently the “Save Our Gold” initiative has the support of the Swiss people.
On October 15th, Switzerland’s largest daily newspaper, 20 Minuten, released the results of an online survey, asking if people were supportive of the gold proposition. Out of over 13,000 responses, 45% supported the initiative, 39% opposed it, and 16% were undecided. Clearly, among informed voters, the “Save Our Gold” initiative is garnering a plurality of the votes. If the initiative wins, the end result on the price of gold in a little over a month from now could be significant.
What this could mean for gold—worldwide—is that there will be a forced buyer in the market. According to currency analysts, the Swiss National Bank would be forced to purchase approximately 1,500 tons of gold (over a five year period), at a cost of up to $83 billion dollars. And that price could end up being on the low end, because analysts have been increasingly inaccurate when it comes to gold price predictions. Should this Swiss referendum pass, what effect do you suppose this might have on Chinese and Russian buyers, who are increasingly big players at gold’s current level? And this is not even taking into account India, whose people have historically been the leading consumers of gold. This referendum has the potential to significantly stimulate worldwide demand for gold, long-term.
The Swiss referendum is but the first of many significant and potential catalysts that might result in higher gold price:
- The recent election of India’s new Prime Minister, Narendra Modi. The gold-friendly leader of India will most likely curb record duties on gold purchases at some point. As Albert Cheng, The World Gold Council’s head of the Far East region observed, “The change (in gold policy) is inevitable because Modi seems to be pro-gold. It’s just a matter of when he is going to do it.”
- Gold in the low $1,200s has approached the actual cost of mining, leaving little to no room for profits. Miners, large and small, are shuttering mines, creating a reduction in future supply of the precious metal. And as demand is set to increase, this could have the effect of a major boost in price.
- More potential catalysts include a rise in government deficits, currency swaps that exclude the U.S. dollar, the threats of war in the Middle East and other parts of the world, and excessive money printing.
If you are considering purchasing gold, you need to consider that whether or not the “Save Our Gold” referendum passes, the possibility of gold being much, much higher in the coming months and years are very realistic. If you’re waiting for substantially lower gold prices, the growing reality is that they may never come. Gold at current prices is a great investment, but the unfolding of future events has the potential to unleash a phenomenal, once-in-a-lifetime rise. The Swiss people are ready to vote for their country to buy gold. Fortunately for you and your investment decisions, there is only one vote to be cast—and it belongs to you. And you don’t have to wait until November 30th to cast yours.
Gold is a sound investment, regardless of world events. If you’d like to diversify your retirement portfolio with physical gold or make a cash purchase, call Advantage Gold today at 1-800-341-8584 to speak with a specialist.