by borrowing gold from the central banks and reselling it immediately. this increases the amount of gold offered directly on the market. the gold lent by the central banks flows back to the lender upon expiration of the forward contract. if the mining companies hedge less, the gold on offer is reduced correspondingly. in the second half of the 1990s, gold producers massively expanded their hedge positions, which led to an increase in supply and thus contributed to depressing the gold price. since 2000, and especially in recent months, the picture has changed. the mines have opted for another strategy and have cut back on price hedging. this strategy change can be partly attributed to more positive expectations regarding the gold price. as a result of the central bank agreement on gold sales, producers no longer fear large - scale sales by the central banks. moreover, it seems that producers have recently become more upbeat in their assessment of private investment demand. it is interesting, in this respect, that gold producers'hedging activity tends to accelerate market trends. when they expect price decreases, prices do in fact decrease faster as a result of hedging, and when they expect price rises, prices do rise faster owing to the decrease in hedging. such strategy changes, which are always due to changed market expectations, have to be reckoned with in future as well. • reviving private investment demand in the industrialised countries has also contributed to giving the gold price a boost. this phenomenon has been particularly pronounced in japan, but europe and the united states have also seen gold demand booming. economic imponderables, concern over the financial health of some companies, heightened political tension in different parts of the world, the terror attacks of september 2001 and concomitantly subdued stock markets have caused investors to increase their holdings of the yellow metal. it seems as if gold is, for the time being, once again assuming its role of a safe haven investment. • fabrication demand for gold, by contrast, for jewellery as well as for industrial uses, has contracted in recent months. in the industrialised countries, this decline has been mainly brought about by the economic slowdown. the high gold price, however, has also played a role, especially in developing countries. in countries such as india, which accounts for a quarter of gold demand, the precious metal is held in the first place for saving purposes. investors use a more or less fixed portion of their disposable income to purchase gold. in

german agreement on a fiscal capacity is welcome and also has important political significance for european integration. building up the esm rescue fund is more urgent. we also need to complete the banking union and the capital markets union without undue delay. the banking union envisages a common deposit insurance scheme. germany has serious misgivings that this would amount to risk - sharing. a common deposit insurance is essential for the completion of the banking union and to underpin the confidence of all depositors in the financial system. this protection of deposits up to €100, 000 will be funded by contributions from banks. but this scheme is just one of the components that are necessary to make the banking sector more resilient and safeguard financial stability. it is of the utmost importance to implement the rules for bank resolution which stipulate that at least 8 % of banks ’ liabilities should be made up of instruments that could absorb losses in the event of bank failure. in my view, all of these instruments should be either equity or subordinated bonds so that all customer deposits would be effectively protected. we have now talked a lot about problems. let ’ s now ask what you see as the greatest achievement of the euro? citizens have overwhelmingly embraced the euro. people appreciate how it brings europeans closer together. many aspects of everyday life have become easier, such as doing business or travelling. the level of acceptance is high in all euro area countries. let ’ s look ahead : your term of office expires at the end of may. do you have any regrets? i am confident that the sustained convergence of inflation to a level below, but close to, 2 % over the medium term will proceed. i will be here for another six months, and i expect to see further progress towards our aim by the end of my mandate, but i will clearly have to leave before the normalisation of our monetary policy. to be successful in our monetary policy we need to be patient, prudent and persistent. 4 / 4 bis central bankers'speeches