WORLD GOLD COUNCIL: SWISS GOLD SALES UNLIKELY BEFORE 2001
WORLD GOLD COUNCIL: SWISS GOLD SALES UNLIKELY BEFORE 2001
New York-Oct. 15-FWN--GOLD SALES BY THE SWISS NATIONAL
Bank (SNB) are unlikely to occur before the year 2001, if
at all, and even then are expected to be in relatively modest
amounts, a study published this week by the World Gold Council said.
Gold forms 40% of Switzerland's central bank
reserves and Switzerland's federal constitution requires a
partial gold backing for the Swiss frame, which has
consistently proved to be one of the world's strongest and
most stable currencies.
But this arrangement is now being questioned, the study
noted. Two Swiss government-appointed committees of experts
have issued recommendations designed to give constitutional
guarantees to the independence of the SNB. They have
proposed the introduction of temporary legislation, which
would reduce the country's gold reserves from 40% to 25% of
the total and also proposed an upward revaluation of the
SNB's gold reserves.
In an independent analysis of the constitutional and
political background, Mark Duckenfield, a political
scientist at Harvard University, defines the legal and
constitutional difficulties of preparing for gold sales from
the SNB. He argues that these obstacles make it unlikely
that sales can take place within the next three years.
Furthermore, public anxiety over the eroding of the Swiss
gold reserves will help ensure that any sales are modest and
take place over a 10- to 12-year period.
In his report, commissioned by the World Gold Council,
Duckenfield says currently gold sales by the SNB are
forbidden by the Swiss constitution, which will need to be
changed to make any sales possible. This will require a
national referendum in which both a majority of individual
voters nationally and voters in a majority of the 24 cantons
(regions) of Switzerland will need to be in favor. Given the
sensitivity and complexity of the issue, that cannot be
viewed as a foregone conclusion; especially as a separate
poll of Swiss attitudes to gold sales, conducted in August
this year, showed very substantial support for the SNB to
maintain significant gold reserves.
"This paper puts events in Switzerland in their proper
perspective," said Robert Pringle, head of the World Gold
Council's Centre for Public Policy Studies.
"The initial horror stories, of a tidal wave of Swiss
gold deluging the marketplace, collapse under careful
scrutiny. Even the more modest stories of a sale of 500 tons
inaccurately suggest large gold sales will occur over a
brief period of time.
"While the SNB may be permitted legally to sell gold by
the early part of the next century, the calamities
envisioned by some market commentators will not be realized
and, specifically, to the extent that Switzerland does sell
gold, it will not be realized and, specifically, to the
extent that Switzerland does sell gold, it will be in modest
quantities over a period of 10 to 20 years," Pringle added.
*** end of story ***
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