As a result, on 2000-05-02, the SNB (Swiss Central Bank) issued a press release
announcing the sale of 1 290 tons of gold in a period of 5 years.

In essence:
pre-2000-05-01, the Swiss Franc was constitutionally valued at 4 596 CHF/kilo (about CHF 142.9/troy oz when published),
post-2000-05-01 the Swiss Franc reserve in gold becomes "more appropriate".

IEF Working Paper Nr. 44

II

Excess Reserves in the Eurosystem:

An Economic and Legal Analysis*

Harald Badinger                               Barabara Dutzler
Institut für Europafragen
Wirtschaftsuniversität Wien
Althanstraße 39-45/2/3, A-1090 Wien
Tel.: 0043 (0)1 31336-4133, Fax: 0043 (0)1 31336-758
harald.badinger@wu-wien.ac.at, barbara.dutzler@wu-wien.ac.at

September 2002

Abstract: Estimates suggest that international reserves of the Eurosystem could be reduced by one third to half ($130-$170 bill.) of its existing level after the introduction of the Euro. While the ultimate decision, whether and how to use these excessive reserves (public debt repayment, financing of a fund, financing of a tax cut) is a political one, some general results can be stated: First, since reserves earn interest revenue, a large part of which is transferred to the government anyway, moderate (but still positive) economic gains can be expected from a reserve reduction. Second, reserve reductions exceeding a certain threshold require the ECB’s approval, which could, however, only be rejected if the envisaged measures were inconsistent with the ECB’s monetary and exchange rate policy. Given that unintended macroeconomic effects can easily be avoided by a carefully planned and coordinated reserve reduction, such a rejection by the ECB – which is subject to the review by the European Court of Justice – is only hard to justify. Equally important from a legal point of view is that reserve reductions, effected as transfer of an extraordinary gain to the government, do not constitute monetary financing as prohibited under Art. 101 EC Treaty. Finally, reducing reserves to an adequate level would also eliminate incompatibilities and conflicts of interest between monetary and investment policy by the central banks and reduce their field of operation to their core task: the conduct of monetary policy. Thus, a carefully planned and coordinated reserve reduction can be supported from both an economic as well as legal point of view.

Keywords: alternative uses, excess, Euro, international reserves
JEL classification: F150, F310

* We wish to thank Fritz Breuss and Stefan Griller for their guidance and assistance. The usual disclaimer applies.
Financial Support by the Austrian Science Fund (FWF) – project number P15256 – is gratefully acknowledged.

In real life, I expect the Swiss Franc to move in parallel with it's neighbors (and this is the Euro), ultimately losing it's status of "reserve" "as-good-as-gold" currency. Although uninformed speculators still will play the history and can constitute  a force sufficient to attract more buyers into the Swiss Franc.

Caveat: don't fight the markets, even if the markets are wrong the fundamentals.