Investors Eye Swiss Vote on Central Bank’s Gold

gold-mcx   Gold prices slipped from a three-week high on Monday as investors weighed the likely path of global monetary policy.

The most actively traded contract, for December delivery, fell $2, or 0.2%, to settle at $1,195.70 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold futures advanced to the highest level since Oct. 30 on Friday after China surprised markets with its first interest rate cut in more than two years. The move spurred demand for gold as a store of value and an alternative to paper currency.

But prices declined Monday, after Germany’s central bank president, Jens Weidmann, a member of the European Central Bank’s 24-person governing council, said that monetary policy alone can’t create growth and must be based on higher productivity and policy reforms.

Mr. Weidmann’s comments contrasted with remarks made Friday by ECB President Mario Draghi , who signaled that the central bank is ready to expand its stimulus program.

Gold traders have been hoping that accommodative measures by Europe’s central bank would spur demand for the precious metal, as investors seek to protect their wealth from the erosive impact of those measures.

Looking ahead, Swiss voters will decide on Nov. 30 whether to approve an initiative that could force the country’s central bank to more than double its gold holdings. Business and political leaders have spoken out against the proposal in the lead up to the vote, citing risks to the Swiss National Bank ’s ability to protect the economy.

“It’s a total wild card, so if there’s a surprise it’s bullish, so that’s going to keep a small bid in the market,” said Ira Epstein, a broker with the Linn Group in Chicago.

Gold prices are likely to become volatile ahead of the Swiss vote, Barclays precious metals analyst Suki Cooper said in a note to clients.

“As polls continue to indicate that the Swiss gold vote is unlikely to pass, should the gold price start to price in a positive vote, we would short the rally in dollar terms,” she said