Finance
Gold Hoarding
IT says something for the enduring faith which is placed in an ultimate return to the gold standard by the leading countries that, in spite of the fact that within the space of less than two years two of the leading countries— Great Britain and the United States—followed by many other smaller countries, have departed from gold, the price of the metal, as measured in currencies, should have appreciated enormously. It might have been supposed that when Governments such as the American* and British had no statutory price for the metal, faith would have been shaken in the value of gold, apart from its use for commercial purposes. It is true, of course, that during the period in which many countries have departed from the gold standard, France has remained on gold, and it has still been possible, through the process of exchanges, to make a calculation of the price for the metal. Over the greater part of two years, however, gold has frequently commanded a price even greater than that represented by the parity of the French exchange, and this has been largely due to a great hoarding movement in gold mainly on the part of foreigners, though the metal itself has been stored in London. At the end of last year, it was currently estimated that this gold hoard in London in the vaults of various banks and Safe Deposits was probably not far short of £100,000,000.
LARGE PROFITS SECURED.
Originally the hoarding movement seems to have been inspired by apprehensions as to the future of cur- rencies, but later by a desire to obtain an ultimate profit on the gold itself by selling it to some national bank or Government after the currency of a country had been devalued. Thus, for example, if a foreigner (British subjects are prevented by law from holding at any time in their possession more than the equivalent of £10,000 in gold) had at one time last year purchased gold at its lowest point of 118s., he would have seen the price rise to the high peak of 140s. per ounce, and thereby secured a great profit, and, indeed, as a result of the very high price touched in recent weeks, it is probable that a good deal of gold has come out of hoarding and has been shipped across the Atlantic, where the American Government now gives $35 per ounce for gold, - a figute which is parallel with the devaluation in the dollar from 100 cents to 60 cents. As a result of this devaluation and the fixed price of gold of $35, it is probable that America has secured within the last two months fully £70,000,000 in gold, and, unlike any previous gold drain, the movement has been due not to any sudden rise in the trade balance in America's favour, but to the manipulation of the currency and to the rush of specula- tive buying of certain American securities based on the hopes of improved conditions in that country.
THE AMERICAN GOLD DRAIN.
Sooner or later there will, presumably, come a general return to gold standards by leading countries, including Great Britain, the return possibly being accompanied by a general devaluation. I must confess, however, that in view of the tactics pursued by a country like the United States I find it difficult to visualize the operation of an international gold standard under present condi- tions. ' By the policy pursued under the Roosevelt regime, America has still further added to her unwieldy stores of gold, and yet by reason of her great favourable trade balance she requires less gold than almost any other country so far as the metal is needed for the settlement of international balances. The holding of these colossal stores of gold, plus the fact of the unsettled War Debts from Europe, gives the United States a position something akin to financial dictatorship, and it is a circumstance which requires adequate recognition. Here is a country which, something like a twelve- month ago, was in a state of semi-bankruptcy so far as * The United States has now'a fixed buying price of $35 per ounce.
internal affairs were concerned ; that is to say, the internal debt of the United States in national and Municipal indebtedness and the indebtedness of farmers and other large sections of the community was, beyond the capacity of the debtor to meet the obligation ; the situation was largely due to the colossal fall in prices. By departing from the gold standard—despite the huge stores of the metal—repudiating the gold clause in all contracts, by devaluing the dollar and by forcing down the dollar exchange through artificial means, prices in America have been hoisted to some extent and industrial activities have also been stimulated, but it has been at the expense of other countries, and particularly at the expense of their gold holdings. -- WORLD'S GOLD HOLDINGS.
How great is this proportion of gold held by America at the present time is shown in the annual Bullion Letter of Messrs. Samuel Montagu and Co. Taking the gold pounds at the old statutory price of 77s. lOid. per oz. Messrs. Montagu and Co. show that at the end of last year the world's visible holding of gold, that is to say, as shown in the Treasury or National Bank statements, was approximately £2,461,000,000, of which only about £190,000,000 was held by the Bank of England and in all, about £286,000,000 by the British Empire. On the other hand, the United States held well over £820,000,000 and France £620,000,000, while, owing to the devaluation of the dollar which has since taken place and the shipments of gold which have been made across the Atlantic, it is probable that the United States' total holding of gold at the present time is nearer to £1,700,000,000.
ARTHUR W. KIDDY.
Previous page
