The western world is not quite ready for reform in the monetary system as the Swiss have voted down the Gold initiative. It is a big win for the Swiss National Bank, as they will continue to have the flexibility to defend the 1.20 Euro cap on the Franc that was imposed a few years ago.
The results demonstrate how important it was to the SNB and Government that the initiative failed. Had the vote passed, the Swiss National Bank would have been the only Central Bank without the monetary tools to debase their currency. So the global fiat currency experiment continues…
Over the weekend Gold had a wild ride as it hit $1150 Sunday night when it was apparent that the initiative was going to fail. However, Asia came to the rescue in the early trading hours on Monday. Gold has been able to rebound and is now trading at $1202, which is more than a $50 price swing from the overnight low!!
Momentum is Steadily Building for Gold
While it is disappointing that the Swiss voted to keep the status quo, there have been some recent positive developments suggesting stronger support for Gold. Last week we wrote about the Dutch repatriating their gold and the right-wing support to repatriate French Gold.
Also, in a recent yahoo article, India has eased import restrictions that were placed on Gold last year. According to the article, India’s Central Bank said in a statement “Restrictions placed on import of gold... stand withdrawn with immediate effect.” (Source: Yahoo Finance 11/29/2014)
India is the worlds second biggest buyer of Gold after China. It was reported that import restrictions were due to a trade deficit crisis that pushed the Indian currency to record lows last year. The lifting of the restrictions is only going to continue to fuel increased physical demand for Gold.
Is a Crisis Inevitable?
The potential lesson that came from the Swiss voters is that proactive measures to return to some sort of sound money system may not work. Central Banks, Mega Corporations and Governments will likely do everything in their power to promote the status quo.
The Swiss no vote may be a sign that the western financial system will not go through any meaningful reform unless there is some sort of major shock to the system. While gold and Silver will continue to be volatile they are the best form of money to hold in a world dominated by central planning.