But the reasons for prudent management of gold reserves by central banks are, in our view, of utmost importance. Central banks are typically “risk averse” when investing their foreign assets on the financial markets; as far as gold management is concerned, an even more cautious attitude is required because of the characteristics of the gold market. Central banks must be aware that their deposits may favour the financing of speculative gold sales. In other words, for a speculator (or a producer) who wants to take a position against gold, it would be very easy to be short because he can easily borrow from the official sector, which is a potential lender on this market. The result of this policy then would be a drop in the price of gold. BIS Review 61/2000  2  Furthermore, lending is even more delicate for a big holder: what is the use of lending if, at the same time, you are depreciating the value of your holdings? This question is effectively not the same when you hold 3,000 tons as when you hold 300 tons. Consequently, our policy regarding gold lending could be expressed as follows: a responsible holder must have a responsible approach to management. This means that the Banque de France has to and does pay due attention to the trade-off between its own interests (ie enhancing the return on its assets) and the impact on the market. The gold market characteristics described earlier call for a cautious and coherent attitude. B.
Needless to say that it is the same in Germany and in all the other countries of the Monetary Union. For this reason, we all fully subscribe to the recent declaration of the President of the ECB, Wim Duisenberg: “European citizens can be assured that the future of the euro is that of a strong currency, based on price stability and the strength of the European economy”. 7  BIS Review 61/2000