The latest gold share of Swiss currency reserves was 7.5 percent. After abandoning the Francs-Euro-peg the SNB could now trade Euros for gold.
Since the start of the new year the gold price only knows one direction: up. With a spot rate of $ 1.272 a gain of 6 percent reflects in the budget since the beginning of the year. Calculated in the european currency at the current rate of 1.105 EUR it’s already 12 percent. Thus, the Euro devalued another 6 percent against the US-Dollar this year.
By abandoning the Francs-Euro-peg the Swiss National Bank (SNB) now retrieved some of its self determination on monetary policy. In September 2011 it began to keep the Euro at a rate of 1.20 Francs, which required substantial purchases of Euros for Swiss Francs (CHF).
Consequently, within four years the SNB’s foreign currency reserves increased by a brief 60 percent, amounting to more than 500 billion CHF. Last October it was said that 45 percent of these foreign currency holding were in Euros, and 29 percent were priced in US-Dollars. Only 38 billion CHF were listed as “gold and gold receivables“, which represented only 7.5 percent of the total currency reserves.
The question now is: Will the SNB sell off parts of its Euro holdings, before it needs to depreciate even more of these paper-assets?
More specific: Will the SNB even buy gold now in order to successively raise the gold ratio of its foreign currency reserves, to demonstrate the new self determination of Swiss monetary policy and ramp up its risk precaution? That would only be consequent.
The current surge in the gold price could be evidence for that. We will know the truth in a few weeks, at the latest once the SNB has released its latest monthly report.