ZURICH (Reuters) - Swiss voters will decide on Sunday whether to force the central bank to boost its gold reserves and whether to impose radical limits on immigration in a series of referendums that have put global markets and business leaders on their guard.
Switzerland's system of direct democracy gives citizens the right to force popular votes if they can gather enough signatures of support.
Initiatives that are approved in such votes must be written into law within three years, regardless of how unpalatable they are to policymakers and the business community.
Sunday's votes reflect growing unease with what some of the population view as a dangerous drift away from traditional Swiss values.
Despite Switzerland's prosperity, some citizens see the country as under siege – from immigrants seeking work and from trading partners who have insisted in recent years that the Swiss dismantle their business model based on banking secrecy.
The recent flurry of popular initiatives is having repercussions beyond the country's borders, threatening to undermine its reputation for stability, spooking foreign firms, and fuelling debate about ties with the European Union, of which Switzerland is not a member.
"This Sunday is also about the future of Switzerland in Europe," national daily TagesAnzeiger wrote on Saturday. "The vote on the (immigration) initiative is also a vote about the bilateral agreements with the EU."
Polls suggest that none of the three initiatives up for vote on Sunday – the gold and immigration referendums plus a third on taxation of wealthy foreigners – will pass.
But they are still being closely watched abroad because of the upheaval they would cause if they did go through.
Gold and foreign exchange markets are bracing for the outcome of the gold initiative, which, if accepted, would compel the Swiss National Bank (SNB) to hold at least 20 percent of its assets in the precious metal and prohibit the bank from ever selling the reserves, already the seventh largest in the world.
The central bank has urged voters to reject the gold initiative, saying it would have to buy 70 billion Swiss francs (46.34 billion pounds) worth of gold – around two-thirds of the world's total annual gold production – within five years to build up its reserves from roughly 8 percent of its assets currently.
The rules, backed by the right-wing Swiss People's Party, could also roil financial markets by making it more expensive for the SNB to defend its 1.20 per euro cap on the franc, imposed at the height of the euro zone financial crisis in 2011 to protect the economy from a soaring currency.
The central bank would need to buy up gold as well as euros when intervening to weaken its currency, potentially casting doubt on the viability of its cap policy, which has already come under pressure from a weakening euro.
"This is certainly not the right time to spend tens of billions of francs to satisfy an expensive right-wing caprice, while the European Central Bank is preparing for a full blown quantitative easing in the coming month," said Ipek Ozkardeskaya, an analyst at Swissquote.
A second vote will decide whether to cut annual immigration by three-quarters from current levels, with the aim of reducing the strain that high levels of immigration have put on Switzerland's natural resources.
The vote could confound the government's attempts to salvage its raft of treaties with the EU, its biggest trading partner.
In February, the approval of a previous vote to limit immigration called into question the country's commitment to the free movement of people principle on which Switzerland's economic ties with the EU are based.
A third vote to decide whether to scrap one of Switzerland's biggest tax perks for expatriates could deal a blow to the country's reputation as a tax haven.
Early projections are due at around 1130 GMT after polls close, with final results expected by about 1600 GMT.
(Reporting by Alice Baghdjian; Editing by Noah Barkin and Hugh Lawson)