Philipp Hildebrand: Reflections on the gold market Speech by Mr Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the LBMA Conference, Montreux, 26 June 2006. *  *  *  Introduction Thank you for giving me the opportunity to speak to you this morning. The last time a member of the Governing Board of the Swiss National Bank (SNB) had the opportunity to address this audience was in June 1999, when our present Governor Jean-Pierre Roth had the difficult task to explain why the SNB intended to sell 1300 tonnes of its gold reserves. Back then, the gold market environment was quite different: the price of gold had steadily declined to USD 250/oz and there were widespread concerns in the market place that central banks were intending to liquidate a substantial part of their gold reserves. In seven years, the market has, in many ways, come full circle: the price of gold climbed to above USD 700/oz before receding below USD 600/oz, levels that were last seen in 1981. Central bank activity in the gold market is not considered as a threat anymore. The agreements of 1999 and 2004 between 15 European central banks - the so-called Washington agreements - have removed much of the uncertainty regarding central bank sales. Indeed, market rumours today are arguably more concerned about central banks buying gold than they are about central banks selling gold. As many of you know, the SNB completed its gold sales program fifteen months ago 1 .
Furthermore, the recovery in exports may be slower than expected if international tourism – and foreign demand generally – take longer than expected to recover, or if sectors worst hit by the pandemic fail to restructure to remain competitive. Turning to the banking sector, the local banks entered the COVID-19 crisis from a solid financial position since they were operating with ample liquidity and high capital ratios, good profitability and declining NPLs. However, the banking sector, just like virtually all other businesses, was certainly not immune to the effects of the spread of COVID-19. It presented banks with unprecedented challenges, both from an operational perspective and financially. Firstly, banks have focused on keeping their employees and customers physically safe and followed the guidelines and recommendations issued by the authorities. The banks ensured that all their business functions continued to operate as seamlessly as possible with the least possible impact on customer services. In particular, their digital banking platforms allowed their customers to continue to undertake banking transactions from the safety of their own homes. Overall, domestic banks responded positively to this challenge and they are proving to be instrumental in supporting both businesses and households, and in providing credit to facilitate the economic recovery. Banks were pro-active and had voluntarily already began providing moratoria before the coming into effect of Directive No. 18. This was necessary to support both businesses and households that had experienced a sudden stop or reduction in income flows as a result of the pandemic.