Five Reasons Gold Is Higher After Swiss Vote

Switzerland held a historic vote on Sunday, Nov. 30. The small alpine nation asked citizens if the central bank should hold a minimum 20% of its assets in gold, not be allowed to sell it off, and store it all at home.

The initiative failed after some strong campaigning, with only 22% voting for and 78% voting against.

A "yes" vote would have been particularly bullish for gold. But despite the "no" vote, gold prices rose anyway.

Here's a look at the reasons gold is higher after the Swiss vote - and why we are bullish on gold into 2015...

How Gold Prices Moved After Swiss Vote

The Swiss gold referendum would have forced the Swiss National Bank (SNB) to buy billions in gold over the next five years.

No public debate on the issue took place throughout October. But after a late October poll showed 44% in favor versus 39% against, a large and concerted effort to discredit the initiative began.

reasons gold is higherThe finance minister, political leaders, and even the president of the SNB (who rarely appears in public) all came out against the proposal in an unprecedented multimedia blitz.

They argued the conditions of the initiative would tie the SNB's hands, constraining its ability to maintain its current peg to the euro and to weaken the franc against other currencies should it be deemed necessary.

In the last few trading days leading up to the Nov. 30 vote, gold began to sell off from $1,200 nearly all the way down to $1,140.

Then after the vote, on Monday, Dec. 1, gold roared back. The gold price peaked at $1,222.90 intraday, hitting a five-week high.

To be fair, not all of this was due to gold's oversold condition leading up to the Swiss "no" vote, which the market interpreted as meaning no sudden surge to buy gold in large quantities.

Other factors also helped drive gold prices higher.

Some of the gains were due to strong physical buying in the $1,150 range. In addition, February oil futures dropped to $64 intraday Monday. This led the market to expect further central bank stimulus to counter this sign of economic weakness and more deflation.

Moody's downgrading of Japan's credit rating also gave gold prices a boost, as well as Friday's news that India's central bank is scrapping its restrictive gold import rules rather than tightening them further.

In the end, gold prices shook off the results of the Swiss vote.

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And despite a victory for the "no" side, gold's vital role in central bank currency management has come to the fore, and not just in Switzerland.

As I discussed recently, even Greenspan has been talking up the virtues of gold, explaining its roles as both a crisis hedge and currency insurance.

Right now it's important to maintain a long-term perspective on gold. Despite the Swiss vote headwind, the precious metal's outlook remains very bullish.

Protection against a backdrop of central planner mismanagement has become more crucial than ever.

More on Gold Investing: Gold prices have taken a beating in recent months, tumbling to four-year lows. But love it or hate it, gold is a smart way to manage risk in your portfolio. Our Chief Investment Strategist Keith Fitz-Gerald shared with readers the perfect strategy for gold investing in moments like this. Use his test to determine if you own the right amount of gold in your portfolio - then, use this tip for the best way to buy more...