Swiss gold referendum likely to pass and send prices higher

(October 30, 2014 - by Arabian Money)

Swiss private bank Julius Baer’s chief investment officer Burkhard Varnholt told Arabian Money that the gold referendum in Switzerland is likely to pass and that will send gold prices much higher next year as the Swiss Central Bank will then have no alternative but to buy gold.

‘I will be voting against the gold referendum,’ he said before a seminar for clients in Dubai’ Royal Mirage Hotel today. ‘I am not against a gold standard but against tying the hands of the Swiss Central Bank and forcing them to buy an asset that they will not then be allowed to sell.

Commodities bull

‘However, I think the referendum is likely to pass, and if a majority supports it then gold prices will go higher.’ Dr. Varnholt also argues that commodity prices in general are almost at a bottom and that a new bull market for oil is around the corner with ’substantially higher’ prices possible next year and a ‘certainty for 2016′.

For US dollar investors – and that includes the dollar-pegged currencies of the GCC – Dr. Vanrholt recommends a 10-20 per cent gold holding in their portfolio for diversification and protection against renewed dollar weakness.

‘The end of QE means nothing,’ he said. ‘It is not going to happen. Loose monetary policy will continue keeping bond yields low for at least another five years. Dr. Varnholt is also ’super bullish’ on the outlook for the Gulf Oil States.

‘If any countries can deal with high oil prices it is the GCC and they are totally able to survive this,’ he said. ‘They have first mover advantage, the position between East and West for trade and transportation, business-friendly governments and a real estate supply that will lag behind demand right up until the 2020 Expo in Dubai.’

Incredible India

Dr. Varnholt is also a China bull and thinks India under Prime Minister Modi will show it ‘really is incredible’. Not surprisingly then his equity allocation is biased towards emerging markets and those Western companies most deeply connected with them like Nestle and Unilever.

On the eurozone believes long-term structural reform with the ‘liberalization of labor and taxation’ will eventually allow these countries to emerge from their current malaise and join a global economic upturn. In a recent meeting with the new Italian Prime Minister Dr. Varnholt noted that this was now moving up the political agenda.

Equities, he argues, are in a long-term bull market that will only end ‘years from now’ when price-to-earning ratios are a lot higher than they are today, while commodities are almost a buy.