niklaus blattner : review of the swiss economy introductory remarks by prof dr niklaus blattner, member of the governing board of the swiss national bank, at the half - yearly media news conference, geneva, 14 june 2002 * * * gold sales since may 2000, the national bank has been selling gold that is no longer required for monetary policy purposes. a total of 1, 300 tonnes of gold is planned to be disposed of under the agreement on gold sales concluded on 26 september 1999 between fifteen european central banks. this agreement limits the total quantity of gold that can be sold by the signatories until september 2004 to 2, 000 tonnes. to date, we have sold almost 520 tonnes of gold, which corresponds to 40 % of the total quantity earmarked for sale. as shown in our periodic bank returns, we are conducting regular sales of approximately one tonne a day. we consider this method more flexible, less costly and better suited to the characteristics of the market than the strategy chosen by the bank of england, which is holding gold auctions of its own. our average selling price has by now reached usd 279. 4 per ounce ( level of 31 may 2002 ), which is usd 2 higher than the average london gold fixing price, the benchmark price for gold. this performance has, to some degree, been realised thanks to the national bank having been allocated a somewhat higher portion of the central banks'total annual quota of 400 tonnes since september 2001. due to the bullish gold market, this slight increase in our sales quota has had favourable effects. translated into swiss francs, the average selling price has settled at over sfr 15, 140 per kilogram. since the sales began, the price per ounce has fluctuated between usd 256 and usd 330 ( see graph ). recently, it has again surpassed the level of usd 320 per ounce. such high levels had been recorded only during short periods in recent years, for example in reaction to the central bank gold sales agreement of september 1999. what is striking about the current gold rally is how persistent it has proved so far. several factors have contributed to this new trend : • a key factor supporting the high gold price is the mines'changed hedging policy. in order to reduce part of the price risk on their future production, the mining companies may engage in forward sales of gold and in similar hedging transactions. the commercial banks, in turn, which act as counterparties in these transactions hedge against the risk

times of rising gold prices, investors buy correspondingly less gold. from these developments we can draw two conclusions : • in the long term, the main elements influencing gold price expectations are changes in private investors'demand, mines'production costs as well as the central banks'fundamental attitude towards their gold reserves. • in the short and medium term, any change in producers'hedging policies and in the central banks'gold holdings, as well as speculative demand can trigger noticeable shifts in the gold price. these price movements, both upward and downward, may be relatively significant because the gold market is not very liquid, as experience has shown. under this point of view, the central bank gold sales agreement of september 1999 has had a stabilising effect, since it has made the operations of central banks transparent and eliminated an important source of uncertainty. our sales will continue until we have completed our programme, i. e. until we have sold 1, 300 tonnes of gold. i will not take the risk and predict the development of the gold price, but one thing is certain : it will remain volatile. our possibilities to actively hedge the gold risk are restricted by the agreement of september 1999. in particular, we may conduct hedging transactions only in the amount of the sales quota allocated to us for the current year. we are therefore all the more convinced that our strategy of regular sales remains appropriate. the principles that have guided our operations for the past two years – namely fulfilment of our commitments under the central bank agreement, transparency in communication and situationadapted handling of day - to - day business – remain relevant. management of the free assets the market value of the free asset portfolio – consisting of the as yet unsold portion of the 1, 300 tonnes of gold and the proceeds from the already effected gold sales – amounted to sfr 21 billion at the end of may. the free asset portfolio is managed separately from our other reserves, which will facilitate its transfer to the future beneficiaries once the legal framework has been put in place. as i mentioned earlier on, our possibilities of actively hedging the gold risk against an unfavourable development of the gold price are restricted by the agreement on gold sales of september 1999. however, we limited the risks of a weak us dollar that might reduce the value of our future sales by hedging 35 % of the future proceeds in us dollars against the swiss franc. the proceeds from the gold sales are