. but here, too, i wonder whether we do not sometimes not so much undersell the product as approach it from the wrong angle. economists, of course, have always struggled to rationalize the merits of gold as a financial investment. but economists, as i have learnt from personal experience, can all too often fall into the trap of being presented with something that works in practice, and objecting, “ that ’ s all very well, but you ’ ll never make it work in theory! ” perhaps for this reason, we tend too often to promote gold as some kind of exotic alternative investment - as asset that best gains in value when everything else is collapsing. gold is thus presented as a hedge against disaster. but its value concept should perhaps be put more constructively, as an asset with distinctive characteristics that offers its own prospects of long - run return, based on a rational analysis of supply and demand dynamics ; and one that, as such, has a part to play, less at some times, greater at other times, in a diversified financial portfolio. financial investment in gold also seems to me to be an area where, in degree, as with jewellery demand, the gold industry can help to shape its own future. products designed to attract broader private investment demand have been with us for some time. initially the focus was mainly on bullion coins - led by the british sovereign and the south african krugerrand, which seem to me to set the standard for solid reliability, though maybe i am biased, and followed by a galaxy of imitators, of which my favourite is the golden nugget, which seems to me to border on the indecent and can only have come out of australia. more recently, financial engineering has entered the field and is producing a range of outlets to reach a wider investing public. the london stock exchange ’ s initiative in listing gold bullion securities is welcome in this field. but as rising personal wealth, particularly in the newly - emerged economies, seeks outlets for its savings, there must be much that the gold industry can do to maximize investment interest in gold. in this vein, i want to leave you with a vision. earlier this year - a year in which we have been celebrating ten years of democracy in south africa - the south african national assembly took delivery of a new mace, the symbol of the sovereignty of parliament and a tangible manifestation of the strength of the democratic process that has taken root in south africa in the past decade. the head of

a year - on - year rate of increase of about 24 percent in the first half of 2004. 4. monetary policy as already indicated considerable success was achieved with the monetary policy measures during the past year and cpix inflation has been within the target range since september 2003. this has allowed the sa reserve bank to keep the repo rate at an unchanged level of 8 percent per annum in 2004. the major threats to the inflation target in this year have come mainly from exogenous factors. at first the drought experienced in the country was regarded as an important risk because of the negative implications that it could have had on food prices in general. fortunately, this threat dissipated when widespread rains in february and march improved the outlook for the maize crop, leading to a fall in maize prices. increases in international oil prices then increasingly became the major negative factor for the inflation outlook. at the mpc meeting in april 2004, developments in nominal unit labour cost were also singled out as a risk to the inflation projection. the rate of increase of these costs declined from 6 percent in 2002 to 5 percent in 2003, but the salaries and wages per worker still increased at a rate of 8, 7 percent. other threats to the inflation outlook that were identified included the stronger trend in monetary growth, the rapid rise in domestic demand, and the threat of increased international instability. these threats to the inflation outlook still exist today. however there are also many positive factors which should assist us in containing inflation in the coming months. the most important of these is perhaps the decline in inflation expectations. other factors supporting a favourable inflation outcome are the strength in the external value of the rand, the decline in production prices, low expected world inflation, low levels of capacity utilisation and the fiscal discipline of government. against this background, our projections of inflation showed that the year - on - year rates of increase in the cpix could temporarily breach the upper level of the target band towards the end of 2004 and early part of 2005. any such breach is nevertheless expected to be short - lived, with the stronger likelihood that cpix inflation would return to within the range shortly thereafter. the inflation outlook in general is still regarded as favourable. this view is supported by inflation expectations of business, labour, analysts and households. in view of the success achieved with an inflation - targeting monetary policy framework, i find it surprising that so many people still seem to be very critical of this framework. this is probably related to the recent strength of the rand. monetary