by Ronan Manly, GoldCore Consultant
- Introduction
- SNB Continues To Intervene In Politics
- Swiss National Bank initial reaction to gold initiative
- Swiss gold at the US Federal Reserve
- “Stocks that were once at the Federal Reserve have been sold”
- Swiss
gold at the Bank of Canada, Ottawa
- 1,300 tonnes of gold sold: SNB’s Michael Paprotta
- SNB’s Paprotta Interview
- SNB’s Paprotta view on Swiss gold held in London
- Conclusion
Introduction
The Swiss referendum on monetary gold approaches on 30 November, less than
four weeks, one aspect of the debate continues to focus on the need, or
otherwise, for the Swiss National Bank (SNB) to continue to store a
percentage of the Swiss gold reserves abroad.
![](http://www.24hgold.com/24hpmdata/articles/img/Mark%20OByrneWhere%20Is%20Swiss%20Gold%20%20Location,%20Location,%20Location-2014-11-03-001.gif)
SVP National Councillor, Lukas Reimann (SG) speaking at the
launch of the Gold Initiative Committee’s press conference in Bern, 23
October 2014
One of the three objectives of the gold initiative is to have all Swiss
gold stored in Switzerland. The Swiss central bankers and the ‘no’ campaign
maintains that it’s imperative to maintain foreign gold storage at major gold
trading centres that can be quickly traded in the event of a financial
crisis. While the ‘yes’ campaign counters that this argument is redundant and
that it is far safer to have Switzerland’s gold stored in Switzerland during
a financial crisis.
For example, Luzi Stamm, an SVP politician of the ‘yes’ campaign, said
recently that there is ‘no compelling reason’ to store Swiss gold abroad,
while Thomas Jordan, chairman of the governing board of the Swiss National
Bank maintains that it’s easier to activate foreign held gold in a financial
emergency if its stored at a major gold trading hub.
Within this aspect of the debate, it’s therefore critical to look at where
the foreign held Swiss gold is actually stored - with the Bank of Canada and
Bank of England and in what form it may be stored - earmarked or
unallocated.
It is also important to examine where the substantial Swiss gold sales in
the early 2000s took place from - which included Swiss gold holdings that
were stored at the US Federal Reserve Bank.
SNB Continues To Intervene In Politics
The Swiss National Bank (SNB) continued to enter the debate this week about
Switzerland’s upcoming gold initiative, despite the SNB not normally entering
into any political debates and discussions.
In an interview with Swiss newspaper NordWestSchweiz published on 29
October, SNB board member Fritz Zurbrügg said that while the SNB is usually
very reluctant to comment on Swiss initiatives and referenda, on this
occasion the central bank feels that they need to intervene[1].
![](http://www.24hgold.com/24hpmdata/articles/img/Mark%20OByrneWhere%20Is%20Swiss%20Gold%20%20Location,%20Location,%20Location-2014-11-03-002.gif)
Historic shot from Bank of Canada, Ottawa - Gold Vault
(Source: Library and Archives Canada)
In the SNB’s view, the gold initiative is an exceptional issue since, if
it passes, it will have a direct impact on the activities of the SNB and will
prevent the Bank from fully following its mandate in terms of monetary and
investment policy.
In a tactic similar to that used by the recently formed anti ‘gold
initiative’ political campaign (http://www.goldinitiative-nein.ch
), Zurbrügg attempted to connect the SNB’s gold holdings to the financial
budgets of the Swiss cantons by highlighting that if gold holdings rose as a
percentage of the SNB’s balance sheet, then a fall in the gold price could
reduce distributable income to the Swiss Federation and the cantons, and that
additionally gold also does not pay any interest or dividends.
Zurbrügg stated that “a high gold content does not guarantee currency
stability”, and he re-introduced the argument that with the gold initiative
calling for at least 20% of central bank reserve assets to be held in gold,
that this gold cannot be sold and is therefore useless in a financial crisis.
This statement, that gold which cannot be sold becomes useless in a
financial crisis is not factually correct. Many central banks in the past
have either swapped monetary gold for US dollars as a way of raising dollar
liquidity, for example the Swedish Riksbank in 2008[2], or used monetary gold
as collateral to obtain US dollar loans during a crisis.
The World Gold Council (WGC) even has an entire team of staff dedicated to
assisting and encouraging central banks to manage and optimise gold as part
of their reserve portfolios, and the WGC regularly runs courses for central
bank staff explaining how gold can provide liquidity and stability to central
bank reserve portfolios.
In an argument for holding gold abroad, Zurbrügg said that an emergency supply
of gold needs to be in ‘major gold trading centres’ of which he claimed both
London and Ottawa to be ‘major gold trading centres’. That’s notwithstanding
the fact that Ottawa has not been a major gold trading centre for many years.
One interesting question from the newspaper journalist to Zurbrügg that’s
worth repeating was that when Zurbrügg was asked “How often does the Swiss
National Bank inspect and check that the Swiss stocks (foreign held gold) are
actually on site?”, he replied “I can say only this much: There are regular
visits. The gold bars are numbered and identified at all times.”
According to a report in the Swiss newspaper ‘Tages Anzeiger’ on 7
October, when Muzi Stamm’s gold initiative campaign team submitted their
initiative to the Swiss Federal Chancellor in March 2013, the campaign
founders had claimed that “almost half of the Swiss gold reserves were stored
abroad - much of it in the United States”, and that it was specifically this
claim that prompted the SNB to then reveal In April 2013, for the first time,
that the Swiss gold reserves were 70% stored in Switzerland, 20% in England
and 10% in Canada[3].
If there had, at some time, been almost half of Switzerland’s 2,590 tonnes
of gold held abroad, much of it in the US, then there would have been
approximately 1,300 tonnes of gold stored abroad, much of it in the US.
Swiss National Bank initial reaction to gold initiative
On 26 April 2013, just over a week after the Federal Chancellor had confirmed
the validity of the gold initiative signature count and the wording of the
gold initiative referendum, the Swiss National Bank (SNB) appeared to be
panicked, since, at its general shareholders meeting, the Bank’s chairman of
the governing board, Thomas Jordan spent over half his speech (4 entire pages
of a 7 page speech) attempting to defend the Bank’s approach to its gold
holdings.
Jordan began by disparagingly referring to the gold initiative as the
‘so-called gold initiative’ when in fact, ‘gold initiative’ forms part of the
popular initiative’s official title, as confirmed by the Federal Chancellor
Corina Casanova in her statement the previous week.
Jordan also attempted to dilute the gold initiative’s goal of repatriating
foreign stored gold reserves by defending the strategy of keeping gold stored
outside Switzerland, and by also revealing the locations of the foreign held
gold.
Attributing the location revelations to the fact that “the SNB is aware
that there has been a growing need for transparency in our population in the
last few years”, Jordan went on to say that of the 1,040 remaining tonnes of
Swiss gold, ‘more than’ 70% was stored in Switzerland, ‘roughly 20%’ was
stored at the Bank of England and “approximately 10%” was stored at the Bank
of Canada. He also stated that “the SNB has been storing gold exclusively in
these countries for over ten years”, which would imply that there had not
been any Swiss gold stored in the US since as early as late 2002.
On the subject of why the SNB stored some of its gold abroad, the SNB
chairman stated that “it ensures that the SNB can in fact access its gold
reserves, especially in an emergency”. Jordan also attempted to reassure
those who might be concerned about whether the foreign held gold was there at
all by stating “our partner central banks keep clearly identifiable gold bar
holdings for the SNB. Each bar stored abroad has a bar identification and
remains the property of the SNB. The availability of our gold holdings is
fully guaranteed at all times.”[4]
Swiss gold at the US Federal Reserve
On 7 October 2014, in further reaction to the gold initiative in the run-up
to the referendum, the SNB released a ‘media dossier on gold’ question and
answer format, with this document only being available in French and
German[5].
In the media dossier, the SNB answers some interesting questions about the
locations and former locations of Switzerland’s foreign gold holdings, and
reveals that Swiss foreign gold had included gold that was in custody with
the US Federal Reserve, but that this gold had been completed sold as part of
the Swiss gold sales. Since all foreign gold in the custody of the US Federal
Reserve is held in the gold vaults of the Federal Reserve Bank of New York,
the SNB are referring to the this gold account held at the FRBNY vault,
sometimes referred to as the ‘Banque National Suisse’ gold account.
Given that the SNB’s Thomas Jordan had said in April 2013 that the SNB had
for over 10 years exclusively stored its non-domestic gold with the Bank of
England and Bank of Canada, this implies that the Swiss gold stored at the
Federal Reserve would have had to have been completely sold prior to at least
early 2003 if not earlier.
SNB Q: Since when has the SNB not stored additional gold in the United
States? Were these (gold) stocks sold or repatriated?
SNB A: “The SNB stores 30% of its gold reserves abroad: 20% is stored in
the Bank England, and 10% in the Bank of Canada. For over ten years, the SNB
stores its gold reserves only in these two countries.
Stocks that were once at the Federal Reserve (Fed) have been
sold.”
The SNB also reveals that most of the 1,550 tonnes of Swiss gold sold from
2000 to 2008 was from gold holdings held abroad. These sales of gold held
abroad also undermine the arguments of the SNB and associated politicians who
claim that foreign held gold is more valuable in a time of financial crisis
than gold stored in Switzerland. If the approximate 700 remaining tonnes of
gold now held by the SNB in Switzerland was not as important as the large
quantities of gold held abroad, then why were the gold holdings that were
held aboard sold and not the gold that was held domestically?
SNB Q:Are we sure that the SNB gold stored abroad is still available?
SNB A: Partner central banks store bars clearly identifiable like those
of the SNB. Each ingot stored abroad is inventoried with an identification
number; it remains at all times in the stock of the National Bank and remains
the property of the SNB. Gold sales that occurred in the past
have largely focused on stocks held abroad. They showed that
gold stocks are available at any time.
The above two facts, and the claim by the gold initiative organisers that
most of the foreign held gold was held in the US, reveal that the SNB had
held significant gold at the Federal Reserve Bank of New York and that most
of the gold sold by the Swiss in the 1,550 tonne gold sales was sold from
stocks held abroad, including significant quantities of Swiss gold sold out
of the Federal Reserve Bank of New York vaults.
Former head of the SNB Philipp Hildebrand stated in 2005, when commenting
on the 2000 – 2005 Swiss gold sales, that 730 tonnes of these sales had been
done on the spot market between 2001 and 2004, and that “typically, the Bank
of England was used for the physical settlement of these operations[6]”
This does not necessarily mean that the gold sales that settled at the
Bank of England were from Swiss gold that had been stored at the Bank of
England. The SNB could have executed sizeable gold location swaps between New
York and London so as to have had enough gold in London in order to settle
gold sales out of London.
In an educational publication of the Federal Reserve Bank of New York
titled ‘A Day at the Fed’ by Charles Parnow, published from 1973 to 1983[7],
it states that in the Fed’s New York gold vault there is “a smaller auxiliary
vault built in 1963” that holds the gold of three account holders. “One
account with 107,000 bars is stacked with bricklayer precision into a solid
wall 12 feet high, 10 feet wide and 18 feet deep.”
These 107,000 gold bars were US Assay office bars, as were the majority of
gold bars stored at the FRBNY. If these bars were of .995 fineness and
average weight of 400oz each, this would total approximately 1,330 tonnes.
When this Fed guide was published, there were only a handful of central banks
/ international organisations that could have held 1,300 tonnes of gold at
the FRB New York, Germany, the IMF and Switzerland. France had most of its
gold stored in Paris and Italy had over half its gold not stored in New York.
The IMF, according to its Articles of Association, had to have over 50% of
its 3,400 tonnes of gold stored in New York so this would be over 1,700
tonnes and would exceed the 107,000 mentioned by Charles Parnow.
The Bundesbank in January 2013 stated that it held 1,536 tonnes of gold
(122,597 bars) in the Fed’s New York vaults[8]. Therefore, this 107,000 bar
wall of gold most likely belonged to the Swiss National Bank’s gold account,
and if this was the case, would suggest that the SNB disposed of this entire
1,300 tonnes of gold from New York.
Other questions in the SNB’s Q&A dossier address the foreign held gold
stored at the Bank of England in London and the Bank of Canada in Ottawa.
SNB Q: Do representatives from the SNB have access to the storage
locations?
SNB A: Access to the gold is governed by the provisions of the central
bank and takes place by agreement between the parties.
SNB Q: When was the last visit of the SNB to these sites (abroad)?
SNB A: Representatives of the National Bank inspect the storage rooms of
gold at regular intervals and in agreement with the central bank partners.
The SNB has been satisfied in all respects by the result of these visits.
Swiss gold at the Bank of Canada, Ottawa
There are a number of significant fact about the Bank of Canada’s gold vault
in Ottawa that the SNB is not telling the Swiss public. In fact, the SNB do
not tell the Swiss public very much at all about the Swiss gold held in
Ottawa. The following SNB Q&A illustrate the dearth of information
imparted by the SNB:
SNB Q: Why does the SNB store gold in the UK and Canada? Where exactly
are the stocks in these countries?
SNB A: The choice of countries where gold is stored meets a series of
clearly defined criteria. It also achieves, outside Switzerland, an
appropriate geographical and geopolitical diversification; the selected
country must have a high level of economic and political stability, provide a
high level protection for the immunity for central bank investments, but also
provide an advantage in terms of market access. The Swiss
National Bank knows the precise geographic location of storage areas in the
countries concerned, but does not provide any information on that subject.
SNB Q: Since when has gold been stored in these countries (England and
Canada)?
SNB A: Deposits in these two countries have existed for several decades
References by the SNB to the Bank of Canada in Ottawa as a ‘major gold
trading centre’ are also inaccurate.
As well as Canada having sold nearly all of its own gold reserves in the
1980s and 1990s, the Bank of Canada only acts as gold custodian to four
foreign central banks. As well as Switzerland, it’s known that the
Netherlands and Sweden both gold small quantities of gold with the Bank of
Canada in Ottawa. The 4th foreign central bank gold depositor is most likely
the Bank of England or the Banque de France as they both had strong historic
gold trading connections with the Bank of Canada during the 1950s and 1960s,
as well as storing gold in the Ottawa vault during WWII.
What the SNB has also not said in the Swiss gold initiative debate is that
the Bank of Canada's remaining custody gold that had been stored in its gold
vault in Ottawa has recently been moved to another vault[9].
The Bank of Canada's headquarters building is situated on Wellington
Street. The gold vault under the Bank of Canada’s HQ building runs from
Wellington Street on one side of the building out towards Sparks Street on
the other side.
This building is currently undergoing an extensive multi-year renovation
which required the Bank to vacate the entire building last year, and empty
it's entire contents, including the gold stored in the subterranean
vault[10]. The renovations will not be complete until January 2017.
Representing 10% of the SNB’s total gold holdings of 1,040 tonnes, this means
that over 100 tonnes of Swiss gold is has recently been moved and the Swiss
public are not aware of this.
The gold in the Bank’s Ottawa vault, in the form of bars and coins, was
relocated in advance of the Bank personnel move. Whatever gold was moved from
the Bank of Canada’s HQ vault has most likely been moved to the Royal
Canadian Mint (RCM) gold refinery vault just a mile down the road from
Wellington Street.
This would also explain why historic Canadian gold coins from 1912-1914
that had been stored in the Bank’s vault for 75 years recently ended up in
the RCM’s vault in November 2012, and why ex Bank of Canada governor Mark
Carney appeared in publicity photo shoots at the RCM vault at that time,
while holding the Bank of Canada gold coins.
“"The Bank of Canada is proud to have safeguarded these national
treasures for over 75 years and we are pleased that they have returned to the
Mint so that Canadians can collect them as precious historical objects,"
said Mark Carney, Governor of the Bank of Canada.[11]”
If the Swiss gold that was previous held at the Bank of Canada’s Ottawa
vault is now being stored in the Royal Canadian Mint’s vault, the Swiss
public should be told this, and be assured that the Swiss gold is segregated
from the Mint’s working inventory of gold.
1,300 tonnes of gold sold: SNB’s Michael Paprotta
In March 2013, just after the gold initiative committee had completed their
signature gathering campaign to call a popular initiative referendum on the
Swiss gold, Michael Paprotta, the former head of money market and precious
metals at the Swiss National Bank, was interviewed by Central Banking
magazine about the proposed gold referendum.
Of all Swiss National Bank employees and former employees, Paprotta is
probably the one person who is most familiar with the Swiss gold reserves and
the sales programme, since, while he worked at the SNB, he was actually
responsible for the famous gold sales program, or as he put it in his
LinkedIn profile “execution of a gold sales program of 1,300 tons”[12]. This
gold sales accomplishment was quickly removed from his Linkedin profile in
October 2012 after it became publicised[13].
As well as responsibility for the execution of the gold sale programme,
Michael Paprotta, in his SNB gold role, also had responsibility for the SNB’s
"gold lending portfolio[14]. Prior to working in the SNB, Paprotta
worked at Edmond Safra’s Republic National Bank in precious metals trading
and sales, but moved to the SNB in January 2000, just after Republic National
was taken over by HSBC.
Patrotta joined the SNB a few months before the start of the 1,300 gold
sales programme which began in May 2000. The first 220 tonnes of sales were
conducted via the gold trading desk of the Bank for International Settlements
(BIS) in Basel. As well as loco London and loco New York, the BIS offers gold
safekeeping and settlement facilities loco Berne[15], through its gold
holdings in the Berne gold vaults of the Swiss National Bank.
The SNB have said subsequently that the first Swiss gold sales in 2000 and
2001 were conducted using the BIS as selling agent because the SNB did not
have the “necessary professionals, know-how, trading resources and contacts
to the international gold market to trade directly[16]”. But this statement
does not make sense in light of the fact that the SNB hired precious metals
trader Paprotta in January 2000 with responsibility for the execution of the
gold sales programme. So using the BIS as a selling agent in 2000 and 2001
was no doubt done for another specific reason. The BIS are, after all, the
world’s inter-central bank gold broker.
SNB’s Paprotta Interview
In the 2013 Central Banking interview, Paprotta, now head of precious metals
and bank notes trading at Raiffeisen bank in Switzerland, indicated that he
plans to vote against the initiative. "It influences the total reserve
management of the Swiss National Bank, and I don't think that is a good
thing," he is quoted as saying.
Paprotta also said that if ratified in the Constitution, the Swiss gold
initiative would create “colliding interests” and that in recent intervention
operations where the SNB has been purchasing large amounts of foreign
currency as a way of preventing the appreciation of the Swiss Franc “then
under these proposals it would have to keep up buying on the gold side to
maintain the minimum level of 20%”.
Paprotta thinks that the most ‘disturbing’ part of the gold initiative
proposal is the attempt to prevent the SNB from selling gold, since, in his
view, this creates inflexibility and puts a floor on the Switzerland’s gold
holdings.
On the question of how the SNB will communicate their opposition to the
initiative, Paprotta said "I don't see the Swiss National Bank coming
out and starting a campaign by putting up billboards. I guess they will be
involved in political discussion, and will make their point, but campaigning?
I don't think so."[17]
SNB’s Paprotta’s view on Swiss gold held in London
As well as dealing in gold, Paprotta is also knowledgeable about transporting
and storing gold, since he gave a 2010 Central banking conference talk in
Hong Kong on the subject of "The Mechanics of Trading, Moving and
Storing" (Gold)[18].
On the subject of the SNB’s gold storage arrangements including the
foreign held Swiss gold, Paprotta said in the interview "I personally
believe the Swiss National Bank did an outstanding job in terms of allocating
where the gold is.”
According to Central Banking magazine, Paprotta “explained that
Switzerland is not the largest centre for unallocated gold trading” and he
noted “that the fixing is conducted in London, most bullion banks are based
in London and they in turn receive clearing services from the Bank of
England.” He added that "it makes perfect sense to have part of your
reserves, if you are actively managing them, in locations where you have
quick access to markets.”
So it appears that the Swiss gold held by the SNB at the Bank of England
in London is being actively managed and that this gold may not be in
allocated storage. Paprotta’s statement therefore does not align with the
continued SNB assurances from Thomas Jordan that all “each bar stored abroad
has a bar identification and remains the property of the SNB. The availability
of our gold holdings is fully guaranteed at all times”.
Conclusion
With the Swiss gold stored at the Bank of Canada, now having been
transferred out of the Bank of Canada’s Ottawa vault to an unknown location,
the Swiss public would be wise to question the SNB on this move.
The Swiss gold stored at the Bank of England in London seemingly being
‘actively managed’ one of the world’s largest centres for unallocated gold
trading, the Swiss public would also be wise to enquire on this issue. And
with significant historical quantities of Swiss gold that were stored with
the US Federal Reserve Bank in New York no longer there after the SNB
seemingly brought their US vaulted gold holdings to zero, the Swiss public
need to question why these particular holdings were targeted for sales from
2000-2005 and not domestically held gold.
Transparency is a matter of public importance - including transparency
regarding the individuals nation’s sovereign gold reserves.
See Essential Guide to Storing Gold and Silver In Switzerland
here
[1] http://www.aargauerzeitung.ch/schweiz/das-the...ve-treibt-mi...
[2] ‘Liquidity in the Global Gold Market' World Gold Council target="_blank" http://www.gold.org/sites/default/files/do...tment-resear...
target="_blank"[3] http://mobile2.tagesanzeiger.ch/article...7da8b7864000001
[4] Speech given by Thomas J. Jordan, Chairman of the Governing Board, at the
General Meeting of Shareholders of the Swiss National Bank, 26 April 20132 target="_blank"013
http://www.snb.ch/en/mmr/speeches/id.../ref_2013042...
[5] SNB media dossier on gold, Q & A form target="_blank"at
http://www.snb.ch/fr/mmr/referenc...source/media...
[6]http://www.bis.org/review/r050509b.pd target="_blank"f
[7] http://www.worldcat.org/title/...511561/editions
[8]https://www.bundesbank.de/Redaktion/DE/Downloads/Presse/Publikationen/2013_01_16_thiele_praesentation_pressegespraech_gold.pdf?__blob=publicationFile
[9] “The Bank of Canada’s move, and what it means for a fabled
underground vault target="_blank"”, 11 June 2013 http://www.macleans.ca/soci...ecret-treasure/
[10] Head office renewal, Bank target="_blank" of Canada, Ottawa http://www.bankofcanada....office-ren target="_blank"ewal/
[11] http://www.mint.ca/st...-as-the-roya...
[12] “Resume Of The Day: Meet The Man Who Sold 1,300 Tons Of Swiss
Gold”, 4 October 2012,
http://www.zerohedge.com/news/2012-10-04/resume-day-meet-man-who-sold-1300-tons-swiss-gold
[13] “Turns Out Dumping 1,300 Tons Of Swiss Gold Isn't A Resume Builder
Af target="_blank"ter All”, 5 October 2012 http://www.zerohed...300-tons-swi...
[14] 8th Du target="_blank"bai City of Gold Conference http://www.duba.../speakers1.html
[15] Loco Berne http://www.b...ing/finserv.htm
[16] Philipp Hildebrand: SNB gold sales – target="_blank"lessons and experiences, May 2005 http://ww...ew/r050509b.pdf
[17] “Swiss National Bank faces referendum over gold sales” by Tristan
Carl target="_blank"yle, Central Banking, 21 March 2013, http:/...wiss-nationa...
[18] “Gold as a Reserve Asset: A key element of central bank portfolio
management”, Central Banking target="_blank"Events, Hong Kong, May 2010, see page 4 h target="_blank"tt...gara_2010_up...
[19] ...d-referendum...
See GoldCore’s Previous Coverage of the Save Our Swiss Gold target="_blank"
Initiative at links below
Swiss
Gold Referendum “Propaganda War” target="_blank"Begins October 14
“Save
Our Swiss Gold ” - Game Changer For target="_blank" Gold? October 17
First
Swiss Gold Poll Shows Pro-Gold Side In Lead target="_blank"At 45% October 21
Swiss
‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern
October 24
MARKET UPDATE
Today’s AM fix was USD 1,170.75, EUR 936.90 and GBP 731.90
per ounce.
Friday’s AM fix was USD 1,173.25, EUR 933.45 and GBP 733.47 per ounce.
Gold and silver were both sharply down for the week at 4.78% and 5.99%
respectively.
Gold fell $26.30 or 2.2% to $1,172.40 per ounce Friday and silver slid $0.33
or 2% to $16.16 per ounce.
Gold fell nearly 1% to $1,161.75/oz today and dropped to 4 year lows as the
U.S. dollar strengthened and technical selling continued as prices had a
target="_blank"weekly close below $1,180/oz.
![](http://www.24hgold.com/24hpmdata/articles/img/Mark%20OByrneWhere%20Is%20Swiss%20Gold%20%20Location,%20Location,%20Location-2014-11-03-003.gif)
Gold in U.S. Dollars - 5 Years (Thomson Reuters)
Gold for immediate delivery fell 0.3% to $1,169.28/oz by midday in London.
Silver fell 2.4% to $15.77 an ounce in London, its lowest price since
February 2010. Platinum remained unchanged at $1,236.30 an ounce. Palladium
added 1.4% and is back over $800 at $803.45 an ounce.
The price of silver is down 18% this year after a 36% fall in 2013 which
is leading to buyers again buying the dip. However, we as ever caution to
avoid trying to catch a falling knife. Wait for the knife to land, bounce and
stabilise before calmly picking it up. Therefore, it remains prudent to wait
for a higher weekly or monthly close prior to dollar cost averaging into
position.
The U.S. Fed said that it was ending QE3 last week and this has seen the
dollar and equities make strong gains - pressurising gold. Investors are now
awaiting a time frame for an interest rate hike. The Bank of Japan increased
its QE from 60 trillion to 80 trillion yen per year.
Gold, in the short term, looks prone to further weakness. We could see gold
test support at $1,156. which is the 61.8% retracement of the move from the
October 2008 low to the all-time high at $1,921.
Below that is the big round number of $1,100/oz and then the even bigger
round number of $1,000/oz.
Precious metals analysts are warning of further losses. Goldman,
SocGen and Barclays and other banks expect weakness into year end. This seems
quite possible given the poor technical position, poor sentiment in western
markets and mome target="_blank"ntum which can be a powerful thing.
![](http://www.24hgold.com/24hpmdata/articles/img/Mark%20OByrneWhere%20Is%20Swiss%20Gold%20%20Location,%20Location,%20Location-2014-11-03-004.gif)
Another powerful thing not being factored into bearish analysts equation
is huge Chinese demand for physical bullion.
Chinese demand’s best proxy is Shanghai Gold Exchange (SGE) withdrawals
which were nearly 60 tonnes last week and heading for over 1,600 tonnes so
far in 2014. On an annualised basis, Chinese demand looks set to be double
the estimates of the World Gold Council which are accepted by the financial
media and western gold analysts.
Gold’s 14 day relative-strength index (RSI) dropped to 25.5 on October 31st,
below the level of 30 that suggests to some traders who study technical
charts that price may be poised to rebound. The RSI was at 24.4 today.
However, short term weakness, possibly into year end seems likely prior to
the secular bull market reasserting itself.
Another positive factor in the gold market being ignored by futures traders
is the Swiss Gold Initiative.
Support for the Swiss gold initiative has waned marginally but remains
high, according to a poll published late on Friday by the free Swiss
newspaper 20 Minuten. Unusually, Reuters did not release the story to the
wires and it appears to have been given exclusively to the Daily Mail in the
UK.
The initiative has sent jitters through both the gold and currency
markets, since it would require the SNB to massively increase its holdings of
gold bullion and informed analysts think that it has a good chance of
passing.
Speaking in Dubai last week, Dr Burkhard Varnholt, the CIO of Julius Baer,
the Swiss private bank, said that he thinks the Swiss gold initiative
referendum is likely to go through and that this should lead to higher gold
prices.
Dr Varnholt is not against a gold standard but he said he would personally
be voting against the referendum due to what he sees as the inflexibility it
will causes the SNB in their implementation of monetary policy as reported by
Arabian Money. Julius Baer target="_blank"is also a gold product provider through their Julius
Baer Physical Gold Fund.
Interestingly, enough the respected Swiss bank which acquired Merrill
Lynch private clients and their sizeable bank of high net worth clients
in 2012, is recommending a healthy allocation of 10 to 20% gold bullion
in their portfolios for diversification and protection against renewed dollar
weakness.
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