First, it has re-emphasised the role of gold in stating that (I quote) “Gold will remain an important element of global monetary reserves”. Second, it has provided the market with some reassuring guidance concerning the sensitive issue of central banks’ gold sales and lending. Far from destabilising the market, the Washington Agreement brought more transparency to the gold market, and helped foster sounder conditions in the price formation process by reducing uncertainty and overall volatility. It is true, however, that the initial market reaction to the joint statement was extreme. The immediate impact of the Washington Agreement was all the more dramatic as a number of market participants (gold mines, hedge funds) had accumulated big and, I would say in some cases, excessive, short positions. The fact that the short sellers had to rapidly square their positions induced a brief period of higher volatility, but also created the conditions for a more orderly market and thus, during the last months, gold prices have fluctuated in a relatively narrow range. On balance, I do think that the joint statement has had a stabilising effect on the gold market thanks to enhanced transparency and clarity concerning central banks’ intentions. Let me now turn to the second topic of my speech: the euro after 18 months. 3  BIS Review 61/2000  II. The euro after 18 months  Some years ago, the possibility of a single currency in Europe was met with complete scepticism, especially in the United States.
This Banque de France view is now widely shared by the central banking community  1. Concerning gold holdings:  The ECB’s decision in July 1998 to hold 15% of its reserves in gold, taken from the gold stocks of the national central banks, was generally seen as a positive signal in a market hitherto inhibited by fears that governments might decide upon new gold sales. This was evidence that gold remains an important element of global monetary reserves. 2. Concerning gold selling and gold lending:  The Banque de France and the Bundesbank have been a driving force behind the 1999 joint statement on gold, which is fully consistent with our traditional position. And I quote: –  “The undersigned institutions will not enter the market as sellers, with the exception of already decided sales. –  The gold sales already decided will be achieved through a concerted programme of sales over the next 5 years. Annual sales will not exceed approximately 400 tons and total sales over this period will not exceed 2,000 tons. –  The signatories of this agreement have agreed not to expand their gold lendings and the use of gold futures and options over the period.” (End quote.) The so-called “Washington Agreement” has clarified the intentions of the Eurosystem as well as of the Sveriges Riksbank, the Swiss National Bank and the Bank of England with respect to their gold holdings.