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28/11/2014: Falling gold price hints at things to come in the event of a Swiss Gold “No”

The recent consolidation in the price of gold has latterly been replaced by selling pressure. In the final day of trading before Sunday’s crucial Swiss Gold referendum the market appears to be showing its views on the election result and it does not look good.

Swiss vote

The poll by Swiss broadcaster SRG at the end of October suggested that the vote was relatively close (44% in favour and 39% against) but the prospects for the “Yes” camp had deteriorated markedly by the latest poll on 19th November which suggests only 38% in favour and now 47% against. The media machine from the Swiss National Bank and the government (both of whom are firmly against) seems to have been working.

Swiss poll

Despite this though, the gold price has been climbing since the 7th November low at $1131.85 and for the early days of this week had been settled around $1190. However, it seems now as though when push comes to show, the market is getting a little jittery with gold up at $1190 amid the likely prospect of a victory for the “No” campaign.

The result of the referendum should begin to filter through on Sunday evening (my sources suggest from around 17:00GMT). This will mean that from the open on Monday morning the gold price will be reacting to the referendum result.

(The implications of the Swiss Gold referendum are discussed in my piece HERE)

The gold price is once more testing the pivotal floor around $1180 today. A close below this support tonight would certainly reflect an expectation of a “No” vote. I would expect that if this is to be the case that gold would fall on Monday morning, retracing much or possibly all of the recent gains seen since the $1131.85 key low.

Gold   28112014

However, the real fun would be seen on a “Yes” vote. This would send the decision to the cantons for the final vote. However in the near term the gold price would likely spike higher. Analysts at Bank of America Merrill Lynch suggest that around 18% upside (that would be up towards $1400) could be seen in gold following a successful change to the constitution. Monday’s spike higher would be significant but would have the key resistance at $1255 to overcome. The impact would be more of a longer term bullish change to the outlook.

Monday promises to be quite a ride for gold. The one sure winner will be volatility. Now we have to just see how the vote turns out.

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.