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EUR/CHF is inching dangerously close to the 1.2000 floor once more, prompting forex market participants to speculate that another SNB intervention will take place sooner or later. After all, SNB head Thomas Jordan has repeatedly emphasized that they are ready to do whatever it takes to keep the franc weak.

EUR/CHF Daily Forex Chart
EUR/CHF Daily Forex Chart

You see, the SNB is infamous for either selling massive amounts of the Swiss currency or jawboning when they think that the franc is appreciating too strongly. An overvalued currency usually makes the country’s exports more expensive in the international market and hurts demand, so SNB officials prefer to have a weaker franc.

However, a recent campaign dubbed “Save Our Swiss Gold” might make matters a little more complicated for SNB head Jordan and his men. This Swiss gold initiative would require the central bank to maintain 20% of its assets in gold, a far cry from the SNB’s current 8% in gold reserves. This means that they would have to buy a huge amount of gold bars from overseas or sell most of its foreign currency holdings in order to meet the 20% gold ratio.

Neither of these options seem viable for the SNB, as these would prevent the central bank from defending the franc peg. According to Jordan, the gold initiative is not in the interest of Switzerland since it would be disastrous to hamper the SNB’s ability to respond to economic disturbances and maintain price stability.

A referendum is scheduled for November 30 (Mark those calendars, people!), after which a majority vote would still need approval from the cantons or member states of Switzerland. Although early polls are hinting at weak support for the gold initiative and a very strong opposition from most of the cantons, the idea of having a limit on the SNB’s powers was enough to boost bullish bets on the franc over the past few days.

Bear in mind though that, in the unlikely event that the Swiss gold initiative pushes through, the SNB has a few other monetary policy options up its sleeve and probably wouldn’t hesitate to roll these out when necessary. For one, negative deposit rates are still on the table in case deflationary risks worsen. Another option for the SNB would be to print more money in order to buy more gold, which would allow them to increase gold reserves and weaken the franc at the same time.

For now, y’all better keep your eyes glued to the 1.2000 level on EUR/CHF as any updates on the gold initiative and potential SNB intervention could lead to a strong bounce or break! Do you think the 1.2000 EUR/CHF floor will hold?