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Talking Points:

• 78% of Voters Rejected the Swiss Gold Initiative While 22% Supported It

• Euro Rose vs. Franc on Bets SNB Will Be Better Able to Defend 1.20 Floor

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Swiss voters rejected the so-called “gold initiative” that would have required the Swiss National Bank to hold 20 percent of its reserves in gold at a referendum over the weekend. 78 percent of voters rejected the measure while 22 percent supported it.

In recent weeks, SNB Governor Thomas Jordan claimed that requiring the central bank to hold 20 percent of reserves in gold would be “unnecessary and dangerous”, making monetary policy difficult as the “Franc Cap is central to ensure price stability.” If passed, the initiative would have make it harder for the SNB to hold the EURCHF floor at 1.20 as any increased purchases of Euros would have required a corresponding increase of purchases of gold, straining FX reserves.

The Euro gained against the Swiss Franc to start the trading week after the results of the weekend vote crossed the wires. The currency pair increase might be reflecting investors seeing a greater probability of the SNB being able to hold the EURCHF 1.20 floor going forward. Meanwhile, gold prices tumbled to the lowest level in three weeks.

original source

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