- LONDON/ZURICH: Monday 12 April 1999
Swiss gold - on hold
The tussle over the proposed sales of gold and the desire among the Swiss
people to make an international humanitarian gesture versus the impulse
to conserve the wealth of the country for domestic purposes may well create
further paralysis in any move to sell gold. Widespread fears that Switzerland
will shortly start to sell large quantities of its gold are unfounded,
says the World Gold Council in a new publication, Switzerland's Gold
( Swiss_Gold.pdf , 324 kb).
The Swiss electorate will be voting in a referendum on Sunday, April
18, to change the country's constitution. If this is approved, the constitutional
link between the Swiss franc and gold will cease to exist, though it ceased
to operate as a de facto arrangement many years ago.
Assuming the referendum is approved, it will pave the way for legislation
to remove the link and, furthermore, it will also remove the constitutional
barrier which prevents the Swiss National Bank (SNB) from selling any
gold.
However, in a 10-point summary of the background to the proposed changes,
Gary Mead, head of research at the WGC's Centre for Public Policy Studies
(CPPS), says that even on the assumption that the referendum passes and
that the necessary constitutional and legal changes are approved, the
need to gain political agreement for the detailed process may hold up
significant gold sales.
Switzerland currently holds 2,590 tonnes of gold in its official reserves
and is the fourth largest holder of gold after the central banks of the
Eurosystem, the United States and the IMF. It has been proposed that up
to 1,300 tonnes of Swiss gold could be sold over a prolonged period, with
the proceeds from some 500 tonnes used to fund a 'Solidarity Foundation'
to help under-privileged peoples around the world, while those from the
remainder would be used to finance projects in Switzerland.
"Several legislative and political hurdles must be surmounted before
any gold can be sold," says Mead. "The SNB and the Finance Ministry
have made their recommendations but how they are practically implemented
will be a parliamentary decision, and one fraught with uncertainty."
The creation of the Solidarity Foundation will have to be approved via
another referendum and opinion is deeply divided over it. There is also
still disagreement over how the other 800 tonnes could be used, more than
18 months after the proposal to sell some gold was first aired.
"According to the SNB, any sale of gold could only follow a decision
by a majority of the Swiss parliament as to what to do with the proceeds.
In Switzerland such decisions depend upon the achievement of a prior consensus
outside parliament among a wide variety of political constituencies,"
says Mead.
Another factor is the general election scheduled for October this year,
which may further delay the planned legislative timetable.
"Although there is determination among some senior Swiss politicians
and within the SNB to sell some gold, it is evident that the debate as
to the purposes of the proceeds from such sales is at a very early stage.
Without that debate being settled, gold disposals of any kind are highly
unlikely," says Mead.
- Ends -
Contacts:
gary.mead@wgclon.gold.org
hugh.williams@wgclon.gold.org
Adobe Acrobat PDF file: Swiss_Gold.pdf (324
kb), requires Acrobat Reader v. 3.0 or higher.
Switzerland's Gold is also available in booklet form from Liz
Melville, World Gold Council, King's House, 10 Haymarket, London SW1Y
4BP. |