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Gold in Focus as Swiss Gold Referendum Looms



Gold in Focus as Swiss Gold Referendum Looms

ETFS Multi-Asset Weekly Gold in Focus as Swiss Gold Referendum Looms


  • Natural gas surges on colder weather.
  • Swiss gold referendum key for CHF strength.
  • Gold miners rally as gold rebounds.

Cyclical assets broadly performed well last week as central banks reiterated economic support. But so did gold and it could continue, despite the strength in the US dollar, in a sign that its price has bottomed after weeks of de-rating, as the Swiss gold referendum looms. Sentiment was buoyed last week with the European Central Bank pledging once again “to do whatever it takes” to ward off deflation. The ECB commenced purchases of asset-backed securities, expanding its QE programme, while the People’s Bank of China cut interest rates to spur flagging demand.


Natural gas surges on colder weather. Natural gas rebounded 13.7% as a cold snap ate into gas storage levels. Natural gas transportation is highly constrained during times of peak demand in New York and New England and last week’s cold weather led to a strong rally in the US North East region in particular. Gold and silver gained 2.4% and 2.9% last week, respectively. With both metals having fallen close to their marginal cost of production, it is increasingly likely that production will be cut, helping to tighten the supply of the metals. Soybeans and corn fell 3.2% each as the rising probability of an El Niño weather event bodes well for growing conditions for the crops in South America over the coming months. The Australian Bureau of Meteorology increased the odd of an El Niño to 70% from 50% previously. Nickel bounced up 6.2% as Indonesia reaffirmed its ore export ban.


Gold miners rally as gold rebounds. DAXglobal® Gold Miners Index continued its recovery from record lows this week, rallying 8.9%, tracking the performance of bullion, albeit in a more volatile manner. Miners initially outperformed gold this year, but in recent months gains have been erased following the tumble in the spot price of gold to the 1,200 $/oz level, slashing the profit margins for high cost producers. Meanwhile, in Europe stocks advanced after Mario Draghi’s dovish comments surrounding the ECB’s asset purchase program which suggested measures will extend to sovereign bond buying if inflation continues to remain depressed and well below the medium term target of below but near to 2%.The DAX 30 and FTSE MIB rose 2.55% and 2.27% respectively, as investors anticipate stimulus measures to be extended.


Swiss gold referendum key for CHF strength. We expect the Swiss franc to lift and test the SNB commitment to maintaining its currency policy floor against the Euro if the ‘Save Our Swiss Gold’ referendum is passed. A ‘yes’ vote for the referendum would mean that the CHF would have a stronger gold backing, in turn increasing its attractiveness for investors looking for hard asset exposure in an uncertain period for European economies. While recent polls have indicated that an affirmative response from voters is waning, as the central back campaign against the proposition, a large proportion undecided voters will be the likely key for victory for either side. Nevertheless, the market does not appear to have priced in the chance of the referendum being passed and we expect the risks for the Swiss Franc (and gold) are skewed to the upside.

Important Information

This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (”FCA”).

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