Both the Swiss Franc (CHF) and physical gold have acted as reserve 'currencies' thereby establishing a relationship between the gold price and Swiss Franc. Despite some differences, the Swiss Franc and the gold price are correlated and the similarities shared by the two can be clearly identified.
The first factor that binds these two key variables (Swiss Franc and Gold Prices) together is the huge amount of Gold Reserves. The Swiss National Bank, or SNB, is one of the largest possessors of gold reserves worldwide. This comes after legislation passed by the government that the Swiss Franc must be backed by gold. This new law was voted into place after the country decided to sell some of its gold holdings. Even though the SNB sold a large part of its gold reserves the bank still holds maintains enough reserves to back approximately 10% of Swiss Francs in circulation through gold. The rise in the prices of gold through 2020 has been of immense benefit for the Swiss Franc; proving the close-knitted relationship between the two.
The second influential factor is the safe-haven status enjoyed by the Swiss banking system. This is what has influenced the positive correlation between the Swiss Franc and Gold prices. Gold reserves are said to act as an inflation hedge and it is no wonder that due to this very reason, Switzerland has faced a very low rate of inflation. Switzerland was able to maintain its Consumer Price Index at 0.5% for 25 years and, for 10 to 12 years commencing in 2008, price levels in Switzerland remained unchanged. The SNB tried to stimulate inflation or lower the value of CHF by reducing the interest rates but this action did not yield any positive results. It was so driven to bring change in the inflation rate that the bank tried to introduce a negative interest rate of -0.75%. This also proved to be futile. Thus Switzerland chose to operate on 0% interest rate.
Switzerland benefits from the prices of gold as a custodian of high gold reserves, showcasing a positive relationship between the Swiss franc and gold prices.