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Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern

Commodities / Gold and Silver 2014 Oct 24, 2014 - 05:41 PM GMT

By: GoldCore


by Ronan Manly, GoldCore Consultant
- Introduction
- ‘Yes’ Campaign Launch
- Paper Decays, Gold Holds Its Value
- ‘No’ Campaign Launch - Alphabet Soup
- Unsaleable Gold Like an Unusable Fire Extinguisher?
- Swiss Electorate 5.2 Million
- Double Majority Including Cantons
- Referendas by the Dozen
- Sometimes There are Shock Results

In what was an extraordinary first salvo in the head-to-head gold referendum battle that will take place in Switzerland over the next five weeks, yesterday witnessed the launch of both the “Save our Swiss Gold” (Gold Initiative)” campaign and the opposing “Cross-party Committee against the Gold Initiative” campaign in Switzerland’s political capital, Bern. Switzerland’s potentially historic gold initiative referendum takes place on Sunday 30th November.
First up was the Gold Initiative Action Committee, the initiators of the gold initiative and the advocates of a ‘Yes’ in the referendum, who launched their campaign at a 10:30am press conference in the conference hall of the Federal Palace Media Centre in Bern[1].
Not to be outdone, the cross-party Committee against the Gold Initiative, the advocates of a ‘No’ vote, held their campaign launch press conference at 1:15pm in the same conference hall at the Federal Palace Media Centre in Bern[2].

‘Yes’ Campaign Launch
The press conference of the Gold Initiative ‘Yes’ campaign committee was hosted by Swiss People’s Party (SVP) members, Luzi Stamm, Lukas Reimann and Ulrich Schlüer.

Ulrich Schlüer, a former SVP National Councillor, disputed the recent claim by Swiss Finance Minister Eveline Widmer-Schlumpf that since the gold initiative calls for 20% of the reserves of the Swiss National Bank (SNB) to be kept in gold, that this would mean that the SNB would need to buy SwF 60 billion worth of gold to raise the percentage of gold on the SNB’s balance sheet to 20%.

Schlüer said that this was not true, and that one alternative would be for the SNB to reduce the size of its balance sheet, bringing down the absolute level of foreign exchange reserves, thereby meeting the 20% target this way. Schlüer argued that given that the SNB would have five years in which to meet this 20% floor level, this would not necessarily impact the SwF / Euro target band, and furthermore, it was also the responsibility of the European Central Bank to manage the Euro’s value, not just the SNB.

SVP National Councillor Lukas Reimann (SG) highlighted that the gold initiative’s stipulation of gold holdings as a minimum target of 20% of the SNB’s balance sheet is still a lot lower than other countries, for example, Germany.
Since gold reserve holdings of neighbouring European countries such as France, Italy and Germany are in the range of 65% to 70% of their total foreign reserve assets, the point Reimann makes is very valid. Not to mention the fact that other large gold holding countries such as China and Russia are specifically doing everything in their power right now to continually accumulate gold reserves so as to bring gold as a percentage of their total reserve assets up to and beyond the 20% level.

The Swiss Federal Council and the SNB have frequently used the comparative statistic of gold reserves per head of population to justify their argument that Swiss gold holdings are the highest in the world (per capita), but in a world of absolute central bank gold rankings, this argument is immaterial.

Paper Decays, Gold holds its Value
The Gold Initiative Committee told their press audience that gold is a long-term “safe and stable store of value" in times of economic turbulence. The Committee views gold as an insurance, and as a reserve asset, with gold reserves being the foundation for a stable currency and economy, while securing the independence of Switzerland[1].

Lukas Reimann said that while gold is money and it defies crises, paper money can be reproduced at will and is easily manipulated. SVP National Councillor Luzi Stamm (AG) said that "paper decays, money holds its value.” According to Stamm, the SNB’s talk of "excess gold reserves" in the 1990s was very misleading.


Luzi Stamm lamented that the Swiss gold sales of 2000-2008, when the SNB sold 1,550 tonnes of Switzerland’s gold, were ‘a big mistake’ and that retrospectively, the sales had been conducted “at incredibly low prices" or "cut-price" levels due to Switzerland having “bowed to foreign pressure.” 

On the question of why the Gold Initiative Committee wants all Swiss gold to be stored in Switzerland, Luzi Stamm asked "who seriously believes that we could bring back the gold in the event of a serious crisis in Switzerland". He added that there was absolutely "no compelling reason" to keep Swiss gold abroad.

SVP National Councillor, Lukas Reimann (SG) speaking at the launch of the Gold Initiative Committee’s press conference in Bern, 23 October 2014

On the specific issue of the referendum vote on the 30th November, Lukas Reimann said that he had never experienced such a large discrepancy between the disinterest which is being displayed by the Swiss media on the gold initiative referendum, and the active interest that is being displayed by the Swiss population to the referendum.

Reimann pointed out that the only Swiss political party that has officially backed a ‘Yes’ vote for the gold initiative is the small EDU party (Federal Democratic Union of Switzerland). Even his own party, the SVP, is showing limited support, and when the gold initiative petition came through the Swiss parliament earlier this year, not even half the SVP grouping voted for it.

‘No’ Campaign Launch - Alphabet Soup
Switzerland has an extensive multi-party political system where cooperation and consensus are usually more important than head-to-head party political opposition and point scoring. In the case of the Swiss gold initiative, apart from a core group of the SVP party, all the main political parties have come out against the proposal. 

Opposition to the Gold Initiative in Swiss politics is widespread and has evolved into a very well structured alliance of political parties from right across the Swiss political spectrum, even to the extent of a well-funded and well-organised cross-party committee actively campaigning to defeat the initiative.  

This cross-party committee consists of an alphabet soup of seven political parties and various other economic groups and unions. The party names can be confusing since they mostly have multiple names and abbreviations depending on whether the French, German or Italian name is being used.

The seven political parties are (in French terms): the PDC, the PEV, the PDB, the PLR, the PS,  Les Verts (The Greens), and the Vert'Libéraux[1]. There are also SVP politicians aligned to this committee.

Notably, there are a top-heavy eight co-presidents on the ‘No’ Gold-Initiative Committee (Gold-Initiative Nein) from all the main political parties, and over 123 politicians listed as  committee members on the campaign’s web site. The head of the ‘No’ campaign is Matthias Leitner, from the FDP, Liberals’ party (PLR in French). 

The eight co-presidents of the committee are Karin Keller-Sutter, advisor PLR States, Alex Kuprecht, advisor UDC (SVP) States, National Councillor Dominique de Buman for the PDC, National Councillor Urs Gasche for the PBD, National Councillor Philipp Hadorn for the PSS, State Councillor Konrad Graber for the CVP, National Councillor Kathrin Bertschy for the GLP, and Ursula Gut, State Councillor Zurich PLR. Six of these politicians spoke at the launch of the ‘Gold-Initiative Nein’ campaign in Bern, as well as another politician, Beat Flach of the small GLP party.

This broad coalition of diverse political and economic interests aligning to try to scupper the gold initiative of Stamm, Reimann, Schlüer and their supporters, shows just how seriously the Swiss political establishment and the Swiss National bank are taking the possibility of the Gold Initiative Action Committee actually coming out on top in the 30 November referendum.

Unsaleable Gold Like an Unusable Fire Extinguisher?
The anti-initiative committee claims that the initiative would be catastrophic for the Swiss economy, since it would undermine the independence of the SNB and obstruct its freedom. The ‘Nein’ committee have even formulated a slogan asking “Would you equip a house with a fire extinguisher if it was impossible to use it in case of fire? That would be absurd!” 

At their press conference yesterday (23 October), National Councillor Karin Keller-Sutter of the FDP said that the initiative was a fire hazard, and that ‘unsaleable gold’ destroys jobs and undermines federal and cantonal budgets[1].

One of the two Swiss National Bank headquarters, on the Bundesplatz in Bern. The majority of the Swiss gold reserves are said to be stored in gold vaults under the Bank and the Bundesplatz  

National Councillor Urs Gasche of the PBD claimed that a strong Swiss Franc would negatively impact on exports and tourism, and that the SNB had saved jobs and rescued the Swiss economy through its use of the SwF/Euro peg.

Alex Kuprecht, actually representing the SVP, said that the gold initiative would put the SNB in chains and that "the SNB must always be able to use the full width of monetary opportunities and act accordingly in crises”.

Dominique de Buman of the PDC said that gold would be useless if it could not be sold, like a fire extinguisher, which you  could not use in the event of a fire. Philipp Hadorn was concerned that if, in the long term, the SNB balance sheet shrank, then gold could end representing a majority of that balance sheet in terms of assets.

Financial Director of Zurich Canton, Ursula Gut, invoked the gold price fluctuation argument, drawing the conclusion that if the gold price fell, it could mean that the SNB would not distribute profits into the federal and cantonal budgets, thereby leaving the federal state and the cantons to have to increase taxes and borrowing, while degrading the service performance of the federal and cantonal governments.

Another speaker, Beat Flach, a representative of the smaller GLP party, said that foreign gold storage is wise for crisis preparedness, and that gold stored in the ‘Swiss gold trading centre’ would not work in times of crisis.

This is notwithstanding the fact that Switzerland is the largest physical gold trading centre in the world. Furthermore, if the Swiss politicians and the Swiss National Bank are so concerned with maintaining feign storage locations for Swiss gold, then why, when the Swiss National Bank sold 1,550 tonnes of sold between 2000 and 2008, did the vast majority of these gold sales emanate from SNB gold holdings at the Federal Reserve Bank in New York which ultimately settled at the Bank of England in London?
 At their press conference, the anti-initiative inter-party committee summed up, saying that “the cross-party committee considers that the gold initiative is nonsense that threatens our country.”

Swiss Electorate 5.2 million
The population of Switzerland is just over 8 million. Anyone 18 or over can register to vote at the Federal level and the size of the electorate is approximately 5.2 million. Swiss citizens living outside Switzerland can vote at the Federal level once that register at a Swiss diplomatic mission and remain registered on their home commune registry in Switzerland.

Double Majority including Cantons
In referendums on federal popular initiatives, such as the vote on the Save our Swiss Gold initiative, the proposal being voted on will not pass into a Constitutional amendment unless it wins a popular majority of the popular vote and a majority of the cantons.

What this means is as follows. There are 20 full cantons and 6 half-cantons i.e. the equivalent of 23 full cantons. If the majority of voters in a full canton vote for a referendum proposal, this creates one canton vote in favour. If the majority of voters in a half-canton vote in favour, this creates one half of a canton vote in favour.

The double majority is explained in Article 142 of the Constitution:

2 Proposals that are submitted to the vote of the People and Cantons are accepted if a majority of those who vote and a majority of the Cantons approve them.
3 The result of a popular vote in a Canton determines the vote of the Canton.
4 The Cantons of Obwalden, Nidwalden, Basel-Stadt, Basel-Landschaft, Appenzell Ausserrhoden and Appenzell Innerrhoden each have half a cantonal vote.

For there to be a majority of the cantons, at least the equivalent of 12 full cantons (out of the equivalent of 23 full cantons) must have voted for the referendum proposal. Otherwise it will not pass, despite the fact that overall a majority of Swiss citizens voted for the proposal. This is another peculiarity of the Swiss federal referendum system which makes estimation of the referendum outcome harder to predict.

The half cantons are Obwalden and Nidwalden, Basel-Stadt and Basel-Landschaft, and Appenzell Ausserrhoden and Appenzell Inner Rhoden. Whereas two of the half-canton ‘pairs’ do have very small populations (and therefore very small electorates), namely, Appenzell Inner Rhoden. Rh 11,473, Appenzell Ausser Rhoden 38,330, Obwalden 25,905,  Nidwalden 30,635. The other half-canton ‘pair’ representing Basel have relatively large populations, Basel-Stadt 114,051 and Basel-Landschaft 187,247. However, some full cantons also have very small electorates, such as Glarus 26,153 and Uri 26,278.

by the Dozen
Voting on referenda in Switzerland takes usually takes place four times per year, with an average of three referenda being scheduled for each of the four days. Polling is held on Sunday mornings but a lot of people vote by post in the run up to polling day.

For the upcoming referenda on 30th November, there are actually two other popular initiative referenda taking place alongside the “"Save our Swiss Gold initiative” referendum, namely "Stop the tax breaks for millionaires (abolition of lump-sum taxation)" and "Stop Overpopulation - to secure the natural foundations of life."

There has been speculation in the media as to how, if at all, the scheduling together of these three referenda might affect the outcome of the gold initiative, due to the possibility that more people who might be in favour of the gold initiative might also be in favour of saying ‘Yes’ to the other two referenda. Since there are so many variables involved in this speculation, its difficult to draw any conclusions at this stage.

Sometimes There Are Shock Results
In the quite well known 14 February 2014 popular initiative against mass immigration, turnout was 56.57%, with 2.91 million people voting. This was the famous shock result where 50.3% voted in favour of limiting immigration and 49.7% voted against.

The voter statistics for the immigration vote last February were “Total eligible voters: 5,211,426”, “Of which abroad: 137,480”, with “Total votes 2,948,156” and “Turnout 56.57%”.

In Switzerland, a few months after referendums take place, the Federal Administration provides very in-depth data on the voting results, giving details on voting patterns across the German, French and Italian speaking areas and also voting patterns between cities, smaller towns and rural communities.

The overall result in the ‘limiting mass immigration’ referendum which produced the 50.3% ‘Yes’ vote hid a lot of interesting variations between urban and rural centres and also between German Switzerland, French Switzerland and Italian Switzerland. Whereas urban centres only voted 41.5% for the motion, rural communities voted 57.6% in favour, highlighting a more conservative stance in rural areas, as would be expected. More interestingly, Italian Switzerland voted 68% ‘Yes’ against 52% ‘Yes’ from German Switzerland, and 41.5% ‘Yes’ from French Switzerland. This just shows the variability across the urban-rural divide and across the country. 

Its also important to note that most federal popular initiatives get rejected by the electorate. Of 118 federal popular initiatives voted on between 1981 and September 2014, only 15 were adopted (12.7%) and 103 were discarded. Other referendums types, namely, mandatory and optional referenda, had a far higher adoption rate over the same period, with 61 of 79 mandatory referendums passing (81%), and 59 of 85 optional referendums passing (69%).

However, in the February 2014 ‘limiting mass immigration’ referendum (referendum #580), the only main party to call for a ‘yes’ vote was the SVP (People’s Party), and the referendum still passed, despite the fact that all other main parties had called for a ‘no’ vote.

Therefore, with both the ‘Yes’ and ‘No’ gold initiative campaigns only now officially beginning, the field is wide open, and the success of each side’s campaigning over the next five weeks will be crucial.  With the only opinion poll so far, earlier this week, showing the Swiss electorate swaying towards a ‘Yes’  vote, Luzi Stamm’s Gold Action Committee appears to have gained the strongest initial momentum.
End of Part 2

by Ronan Manly, GoldCore Consultant
Editor, Stephen Flood, GoldCore CEO
Get Breaking News and Updates on the Gold Market Here 

Today’s AM fix was USD 1,231.75, EUR 973.71 and GBP 767.97 per ounce.
Yesterday’s AM fix was USD 1,240.50, EUR 979.94 and GBP 775.31 per ounce.
Gold fell $8.60 or 0.69% to $1,232.90 per ounce and silver climbed $0.07 or 0.41% to $17.22 per ounce yesterday.

Spot gold in Singapore eased 0.1% to $1,230.48 an ounce by 0020 GMT, after slipping over 1% in the prior two sessions.

The yellow metal is headed for a weekly loss of 0.6%, its first decline in three weeks, while the U.S. dollar gained after two weekly declines in a row.

Palladium raked in the best performance among precious metals with over a 4% jump set for its biggest gain since March.

In London, gold in Swiss storage traded near its lowest price in a week as investors weighed economic data pointing to signs that the U.S. economy is recovering. Silver for immediate delivery added 0.4% to $17.2702 an ounce in London. Platinum was nearly unchanged at $1,256.63 an ounce.

Gold bullion bounced back from lows made on October 6 after the U.S. Fed said slowing overseas economies were a risk to U.S. expansion. Traders have pushed back estimates for when policy makers will raise U.S. interest rates. Gold coins and bars prices dropped 28% last year on expectations of less QE from the Fed.

See Essential Guide to  Storing Gold In Switzerland here

This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director




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