LONDON/ZURICH, Oct 23 (Reuters) - The Swiss franc has been a haven of relative calm in choppy currency markets in recent weeks, but a referendum next month on "saving" Switzerland's gold reserves could change all that.
For currency investors, though, the new requirement could generate volatility in the franc and threaten the three-year-old cap on its value against the euro, which the SNB imposed to prevent the Swiss currency from appreciating, ward off deflation and boost growth.
The bank now invests the bulk of its currency reserves of around 500 billion francs in euros and about a quarter in dollars. The share of gold holdings has been coming down over the past few years as it stepped up its intervention in the currency market.
A "Yes" vote would see it more than double the quantity of gold holdings. Given the preponderance of euros in its FX reserves, that would most likely entail selling euros. The single European currency would probably drop, threatening the SNB's 1.20 francs per euro floor, analysts said.
The gold initiative's committee began its campaign in the Swiss capital, Berne, on Thursday. Posters showing a red and white piggy bank - the colours of Switzerland's flag - and the slogan "Save our Swiss gold" can already be seen around the country, including Zurich's main railway station.
The latest polls show the initiative does not have huge support - about 45 percent, which is expected to decline as the vote comes closer - and is controversial even within the SVP. It is also not prominent on investors' radar.
