economies or other industrial countries and then spill over to germany. many mature economies are currently experiencing buoyant economic conditions, output gaps have been closed in many cases, and cyclical risks in the financial system are mounting. financial institutions with higher levels of capital are more robust and thus also make the financial system as a whole more resilient. if all market participants have strong defences, the risk of contagion falls. unexpected events will then have less severe consequences. however, resilience needs to be built up in good time – once a recession has begun it may already be too late. it's rather like building up protection against the flu. once a wave of influenza has broken out, it is too late to get vaccinated. the only problem is that when the weather is fair and you feel well, it is all too easy to forget that times may also take a turn for the worse. it is therefore important to take preventive action. if the financial system is not resilient enough, this can amplify an economic downturn. banks would then excessively curtail their this quote is attributed to john f. kennedy. lending precisely when the economy is already running into difficulties. this is precisely what happened around the globe in the last crisis. defences therefore have to be built up when times are good. currently, the sun is shining on the markets, we are experiencing the longest period of growth since the 1970s, and credit losses are low. now is the time to build up sufficient capital, which will strengthen the resilience of individual institutions and the financial system as a whole in the event of an economic downturn. list of references committee on the global financial system – cgfs ( 2018 ). structural changes in banking after the crisis, cgfs papers no 60, january 2018. deutsche bundesbank ( 2018 ). june 2018 monthly report. german financial stability committee ( 2018 ). funfter bericht an den deutschen bundestag zur finanzstabilitat in deutschland, june 2018. international monetary fund – imf ( 2018 ) world economic outlook update, july 2018.

in the country. among the others, as reported by the ft, the government had signed contracts with five gold refineries to convert jewellery handed over under the programme into gold bullion that would contribute to the country ’ s central bank reserves. world gold council, gold demand trends full year 2022, january 2023. ‘ treaty on monetary reform ’, 1932. world gold council, you asked, we answered : the history, context and outlook for central bank gold buying, march 2023. the first is obvious ( with so much gold held by central banks, any significant sale is bound to impact prices hugely ), but of little use as an explanation for any increase. default is impossible, though price movements are not. in fact, the price of gold fluctuates greatly : its annual volatility over the last 50 years has been around 19 per cent, compared with 15 per cent for global equity. 8 low storage costs per unit of value used to be one reason why precious metals functioned as a store of value for much of recorded history ( from antiquity to florence ’ s fiorino, britain ’ s gold pound, france ’ s napoleon ), along with other features such as inalterability and ( to an extent ) intrinsic utility. however, the cost of physically storing gold is nowadays incomparably higher, per dollar or euro or pound sterling or franc, than holding costs for most substitutes available today ; and, while transferring electronic money costs next to nothing, actually moving gold from one country to another, as in the textbook representation of the gold standard, is as cumbersome and costly as it has always been. therefore, even gold ’ s use as a store of value must have something to do with history. yet also, perhaps, with risk, especially super - tail risk. electronic reserve assets can conceivably disappear in extreme circumstances ; gold cannot. ( you might theoretically conceive of a planetary catastrophe that would pulverise even gold, but in such circumstances this is not likely to be the most pressing of humankind ’ s problems ). which brings us to the more interesting reasons why central banks still hold significant amounts of gold reserves. let ’ s start with ‘ normal ’ market risk. with regard to diversification benefits, as this audience knows very well, an ample empirical literature shows that gold has a low correlation with other traditional asset classes. 9 according to a recent estimate, 10 gold has shown a monthly correlation of 0.