SNB Governor Jordan’s comments in two separate Swiss interviews overnight appear politically motivated. A “yes” vote on the Swiss Gold Initiative (SGI) would make both managing the floor on EURCHF and the economy more difficult but the floor would not be in jeopardy. If the law passes on November 30 (obliging the SNB to hold a minimum 20% of reserves in gold from 9% currently) an added level of complication would be added to the management of FX reserves for the SNB. Still, we do not believe that such a change would threaten the bank’s ability to sustain the 1.20 floor on EURCHF. For example, the bank could issue USD-denominated debt to fund purchases. Or, if they wanted to do QE they could print CHF and use it to buy gold. The point is there are probably several ways to engineer this without having to simply dump FX reserves or end the peg. Furthermore, selling EURXAU is unlikely to compromise the peg — the EURXAU flows would be totally irrelevant to EURCHF.