How the Swiss Gold Referendum May Be Pushing Down the Gold Price

[Ed. Note: For the last month and a half, we’ve been discussing the upcoming Swiss Gold Referendum — specifically how, if passed, it could lead to a serious collapse of the financial markets, and send the price of gold skyrocketing. But before that happens, there’s significant downward pressure on the yellow metal — a fact not lost on Dave Gonigam or our colleague Greg Guenthner. Read on…]

“Do you think,” one of our 5 Min. Forecast readers wrote us late on Friday, “that the decline in the price of gold has anything to do with the upcoming Swiss referendum regarding gold?

“Maybe the Swiss powers that be are suppressing the price so they can buy gold cheap in anticipation of the outcome of the vote.

“Just a thought.”

Hmmm… With the passage of the weekend, it’s a thought we won’t dismiss out of hand.

This morning, the bid on gold is about where it was on Friday — $1,168.

Don’t expect it to hold, says Greg Guenthner of our trading desk. Or as he put it succinctly in this morning’s Rude Awakening, “Do not buy gold right now.”

If you’ve been with us for a while, you know “Gunner” got no small amount of grief from our readers in early 2013 when he accurately called gold’s slide at $1,650. “Antichrist” was one of the kinder names readers gave him.

But the call was spot-on. From there it was down, down, down to $1,180 in late June.

Three times since then gold has tested that $1,180 level. On Friday, it failed that test.

This failure is at least as significant, he says, as the day gold crashed through $1,550 in April of 2013. “Just look at the similarity between the big 2013 nosedive and today’s downward action,” he says as he directs your attention to this chart…

Gold Spot Price, 2010-2014

“In both cases, gold topped out with a series of lower highs before the crash accelerated. Last year, this action handed investors losses of more than 23%.”

“It gives me no joy to say it…” Greg summed up this morning’s Rude, “but I expect the gold price to eventually come to rest somewhere near $1,000. A fall to the 1K mark will break the final leg of the 10-year gold bull. Bet on it. The fat lady’s already warming up…”

If the fat lady’s warming up, perhaps the libretto is written in Mundart — the Swiss dialect of German.

As we’ve chronicled for the last five weeks, Swiss voters go to the polls on Nov. 30 to decide three matters pertaining to the Swiss National Bank’s (SNB) gold hoard. If the measure passes…

  • The SNB would be forbidden from selling any of its gold
  • The SNB would be required to buy enough gold to equal 20% of the country’s foreign-exchange reserves (it’s currently 7.7%)
  • All Swiss gold held at the Federal Reserve Bank of New York would be returned to Switzerland.

The SNB has declared its opposition to the initiative, on the grounds it would give them less “flexibility”. To which supporters would counter, “Yes, that’s the whole idea.” Heh…

One of the people heading up the “yes” campaign is a friend of Agora Financial — Egon von Greyerz. He’s the proprietor of Gold Switzerland, a firm that affords high-net-worth individuals access to a vault located in the “free zone” at Zurich International Airport, outside the reach of even Swiss customs authorities.

Egon’s public-awareness effort is called the Swiss Gold Initiative. It’s been accepting donations to help spread the word, with many of them coming from the United States.

But not via Paypal — not since last Wednesday.

“We have received an unexpected simple template notification from PayPal that they can no longer receive donations,” says a statement on the Swiss Gold Initiative website. The notice said the decision was final.

And with that the Swiss Gold Initiative joins some exclusive company — including WikiLeaks and an adult film starlet named Teal Conrad…

Teal Conrad, WikiLeaks and the Swiss Gold Initiative - All Banned By PayPalBanned by PayPal!

The Swiss Gold Initiative is asking PayPal why it got the ban hammer when it fully complies with Swiss law. It’s still waiting for a response. Presumably donations will be returned to the donors, but even that hasn’t been made clear.

Meanwhile, the vote on the Swiss Gold Referendum is 27 days away. The polling data is all over the place, with a sizeable number of undecideds.

“There is some nervousness and as a risk event the focus is increasing,” UBS strategist Beat Siegenthaler tells Reuters. “Chances of a ‘Yes’ vote are low, but if it does happen there will be huge implications, and just not for gold.”

That’s what our Jim Rickards has been saying for more than a month. “The gold market and central banks,” he said in this space on Oct. 1, “are whistling past this graveyard. They may be in for a shock when the votes are counted.”

Regards,

Dave Gonigam
for The Daily Reckoning

P.S. This is just one of the many “snowflakes” Jim sees that could lead to a financial avalanche that brings the whole system down. Time will tell, but it’s best to stay informed. Keep watching this space for regular updates as the story progresses. And for exclusive access to real, actionable advice on how to prepare yourself, click here now to sign up for my 5 Min. Forecast.