A proposal requiring the Swiss National Bank (SNB) to hold a fixed portion of its assets in gold makes no sense, according to Citigroup, which opined that the precious metal was comparable to virtual currency bitcoin.
Five million Swiss voters will on 30 November vote on a proposal that will require the central bank to hold at least 20% of its assets, from 8% at present, in gold.
The proposal dictates that those assets be stored in the country and never be sold.
Proponents of the proposal, which will also require repatriation of SNB bullion held with the Bank of England and with the Canadian central bank, have argued that it will protect national wealth.
But the government and the SNB have opposed it as they say it will hinder monetary policy.
If the proposal wins a majority, it could spark a global gold rush, Bloomberg reported.
Citigroup believes the Swiss central bank will have to buy at least 1,733 metric tons of gold, compared with an annual production of about 2,500 tons, to meet the threshold by 2019.
Bank of America has estimated that any potential Swiss purchases could trigger an 18% rally in prices.
Gold as Bitcoin
Citigroup's chief economist Willem Buiter, a former BoE policy maker, questioning the proposal's rationale, said that like bitcoin, gold has no intrinsic value and is costly to produce and store.
Buiter wrote in a 26 November report: "There is no economic or financial case for a central bank to hold any single commodity, even if this commodity had intrinsic value.
"Forbidding a central bank from ever selling any gold it owns reduces the value of those gold holdings to zero."
"If the central bank is to invest in commodities, better to have a balanced portfolio of commodities or, more conveniently, a balanced portfolio of commodity ETFs or other derivatives," he added.
Morgan Stanley has said that the complexity of the gold referendum is a "substantial" hurdle for a 'yes' outcome.
HSBC Securities (US) noted on 24 November that while 'yes' will be good for gold prices, 'no' will be neutral.
Additional purchases, estimated by the SNB to be about 70bn francs ($72.7bn, £46bn, €58bn), will make Switzerland the biggest holder of gold after the US and Germany.
Switzerland is already the seventh-largest holder of the yellow metal with 1,040 metric tonnes, according to International Monetary Fund (IMF) data.