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A view on Switzerland in the run up to the demonetisation of gold

22nd Annual FT World Gold Conference, London, 14 June 1999, 14.06.1999

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The process of demonetisation of gold is well under way in Switzerland and one can reasonably expect that the gold parity of the Swiss franc will be abandoned in the spring of next year. The demonetisation of gold will give the Swiss National Bank sufficient room for manoeuvre to become active on the market. Gold transactions could thus be scheduled to begin next year when the legal framework will be in place. Greater uncertainty surrounds the question of the allocation of excess reserves, but this will have no impact on the sales intentions of the Swiss National Bank.

As a major holder of gold, the Swiss National Bank has no interest in adopting a strategy which would push the gold price down. 1300 tonnes of gold, the volume earmarked for sales, cannot be absorbed by the market in a short period of time. The National Bank is therefore considering distributing the sales over a period of several years. But gold will continue to play an important role in Switzerland's monetary reserves. The recent revision of the Constitution has led to the stipulation that the Swiss National Bank should maintain "sufficient" gold reserves. This element was introduced at the initiative of the Swiss parliament, which indicates that the Swiss people wish to keep ample gold reserves. Consequently, the National Bank does not envisage going beyond the announced plan of selling 1300 tonnes.