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Gold dips ahead of Swiss vote

Gold eased amid thin trading ahead of a Swiss vote on Sunday that will decide whether the country's central bank should keep at least 20 per cent of its assets in the yellow metal.

The precious metal was trading at $1,185 a troy ounce, down 0.7 per cent on the week in choppy trading.

Volumes remained relatively thin as many investors chose to sit on the sidelines ahead of the Swiss referendum as well as the Thanksgiving holidays in the US.

A Yes vote will mean that the Swiss National Bank will need to hold at least 20 per cent of its total assets in gold, with all physical gold held overseas repatriated. The central bank will also be forbidden to sell the gold it holds.

The first results of the referendum are expected to come out about an hour after the polls close at midday on Sunday.

Latest data by Gfs Bern, a polling agency, found that opposition for the initiative was at 47 per cent, with 38 per cent in favour.

With 15 per cent still undecided, there is a possibility that the proposal will pass but many analysts see enthusiasm for the initiative waning.

Edel Tully, precious metals strategist at UBS, said she expected the proposal to be voted down. "We think gold prices already reflect this outcome," she said, adding that a No vote would have limited impact on the market.

In the short term, if the initiative is voted down, gold is likely to fall back towards the early November lows of $1,131 a troy ounce as speculators who have put in place bullish positions vanish.

Leon Westgate at Standard Bank said the metal would "track oil lower, particularly if deflationary concerns persist".

Given the high expectations of No vote, a surprise outcome could give the precious metal a big boost. Apart from a rush to buy gold as a kneejerk reaction, the impact of SNB purchasing would lift the yellow metal, said some analysts.

James Steel at HSBC estimated that the central bank would need to buy a minimum of 1,500 tonnes of the metal, which would "significantly impact by tightening supply and demand balances".

A Yes vote would push gold prices higher by at least $50 a troy ounce in the near term, he said.

If the initiative was voted through, it would reaffirm gold's status in the international financial system, encouraging other central banks to step up or consider buying the precious metal, said Mr Steel.

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