Swiss National Bank President Thomas Jordan said in interviews given to Le Matin Dimanche and SonntagsZeitung that the popular initiative, to be put to a vote on November 30th, would be “fatal “for the bank.
“To combine a fixed quota (for gold) with a ban on selling it would be fatal,” he said.
“That would limit the long-term activities of the BNS.”
The initiative, backed by members of the right-wing Swiss People’s Party, aims to guarantee the financial independence of Switzerland and ensure the Swiss francs remains strong.
The proposal would give the central bank five years to increase its gold reserves from around 7.5 percent of its total assets (1,040 tonnes) to 20 percent.
The initiative would also require the SNB to store all its gold in Switzerland.
That would mean repatriating within two years the 30 percent of of its gold that is kept by the Bank of England and the Bank of Canada.
But Jordan said the proposal is misguided and could even play into the hands of speculators.
“They could hardly dream of having the certainty of knowing that somebody had to buy 70 billion francs’s worth of gold that they could not subsequently put on the market,” he told the newspapers.
“It’s not the amount of gold held by the national bank that determines the stability of prices and that of the Swiss franc, but our monetary policy.”
Over the past 20 years, the SNB has been able to keep annual inflation at an average of less than one percent, Jordan said.
“Before, we had much more gold than at present and yet, despite that, we had inflation that was substantially higher.”
The federal government and the federal parliament have both opposed the gold proposal.
And the SNB has spelled out its opposition on its website.
The bank maintains that a “stability-oriented economic policy” requires it to be able to expand its assets in crisis periods while reducing them again afterwards.
The SNB noted that it has no intention of selling gold and that Switzerland has the highest gold reserves in the world on a per capita basis.
The bank argues that storing gold in different locations “serves to diversify the risk” but it stressed that, contrary what is sometimes assumed, it “does not hold any gold in the US”.