EUR/CHF looks to have been hit with a double whammy as the ECB news and worries over the gold referendum intensify.

We’re down below 1.2050 marginally and I’ve had a spike lower to 1.2025 on my Netdania chart, though not elsewhere so it could just be a blip.

The referendum is over whether the SNB stops selling gold and instead increases holdings. If the result goes in favour of the increasing gold holdings then it’s expected to bring the Franc cap into focus.

George Dorgan at ( and who pops by here from time to time) says the following;

A referendum “Yes” implies a Swiss franc appreciation, end of the franc cap?

If the referendum is accepted by the Swiss people, then the SNB would need to:

  1. Either double the quantity of gold holdings (i.e. buy it expensive after selling it cheap)/
  2. Sell half of its fiat money reserves.
  3. Or a mixture of both.

In the first case, the gold price should rise and with it the gold-correlated Swiss franc. In the second option, the Swiss franc should rise even more. Previously the franc was correlated to gold mostly thanks to low Swiss inflation and the (formerly) strong monetarist ideas inside the SNB.

Now the CHF is correlated to gold thanks to global trade surpluses produced by Swiss multinationals that correspond to rising global gold demand. The Australian dollar is a similar currency that profits on Chinese and global growth. Both the Swiss and the Australian currencies are often used as proxies for Chinese expansion, because they provide assets related to China without having the obligation to invest directly in Chinese investments.

The polls have been been a tug of war so far and the latest shows the no votes ahead, though George notes that a more reliable poll have the yes’s in front

You can read his very good write up on the ins and outs of the referendum from here.

In the meantime we’re still a couple of pips below 1.2050 and there’s suspected involvement by the SNB around these levels. Staying below 1.2050 brings that cap ever closer and the lowest we’ve been since it came into effect was 1.2029 back in Nov 2012 and more recently to 1.2043 back in August.

EUR/CHF Weekly chart 04 11 2014

EUR/CHF Weekly chart 04 11 2014