Over the weekend, as Swiss citizens rallied to the polls to vote on the important issue concerning the share of gold in the country’s central bank reserves, the expected result of the referendum was approached by the precious metals market with no excitement.
The Swiss National Bank’s officials must have been relieved to see that the once dangerously sounding Swiss Gold Initiative was voted down by the electorate, however the gold market was in a mood of its own on Monday.
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As the precious metals market had already discounted last week, the vote was not even close, with more than 77% of the voters turning down the initiative along with a vote on introducing an immigration cap and abolishing the flat tax.
Our analysis on Friday already concluded that the discounting mechanism (which the market undoubtedly is sometimes) had already priced in a “no” vote. However, the age old trader adagio of “buy the rumor, sell the fact,” which in this particular case was reversed, kicked in and profit taking on short positions began near the close of the Asian trading session.
In front of astonished looks of precious metals traders throughout the European and the US session, gold rallied almost five percent to current levels of around $1,217 per ounce, having opened in early Asia around $1,160. Buyers of the yellow metal flushed stops above $1,165, $1,185, $1,200 and $1,210 in a matter of minutes, resulting in the biggest daily rally of gold this year.