The Dominion. MONDAY MARCH 7, 1910. GOLD AND CURRENCY.

Dominion, Volume 3, Issue 759, 7 March 1910, Page 6

The Dominion. MONDAY MARCH 7, 1910. GOLD AND CURRENCY.

The world's gold output in 1903 is. estimated to have reached £91,000,000, as compared with £87,250,000 in 1908, and £82,750,000 in 1907. The increase shown in 1909 is not so great as that shown in 1908, still the expansion is large, and the great volume of the output may be expected to have a beneficial - effect on trade and commerce. The world is indebted to the African Continent for the bulk of its supplies of gold. The returns of five of the chief producing countries which arc .available show the following movements: — ■ ■ • » . 1909.' , mos. £ £■ Transvaal •....— 80,925,788 29,986,409 West Africa 955,635 1,186,342 India _. 2,185,066 2,154,070 Australia \ u>410.438 11;937,073 New Zealand ~.. 2,000,900 . 2,004,925 .£47,483,827 w£47,268,579 These five countries account for considerably more than half. From the Hand alone more than .one-third of the total of the world has been obtained, and if we include the returns from West ".Africa, Rhodesia, the Gold Coast, and the other producing centres of Africa, the black Continent supplied the world with about half the new gold obtained last year. Although the Band secured so large a yield, the amount paid in dividends last year totalled £9,509,766, or less than a third of .the total value..' . . ' . ■ A considerable quantity of gold is absorbed in the- arts and crafts, and an appreciable amount is used for currency purposes. Comparing the amounts held in gold by the various European banks at the end of December, 1908, and 1909, we obtain the following: — 1908. 1909. ~ £ & England ..__. 30,732,402 32,628,075 Germany 36,141,000 34,082,000 Prance . 139,529,000 139,815,000 Russia 107,893,000 U7.802.000. Austria 49,250,000 56,417,000 Italy 45,625,000' 46,960,000 Holland • 8,425,000 10,081,390 Belgium .._ . 6,362.000 . 6^358,000 Spain „.....' 15,802,008 15,817,000

. ■ , ,£439,759,402 .£459,960,465 The principal European banks during 1909 added over to their stock of gold, and if we take the American, Canadian, Australasian, South African and the Eastern banks, another thirty millions may be safely added. Then there is the unknown amount hoarded in India and Egypt. Ample supplies are available to meet the currency demands of the world, and if some of the European countries made greater uso of the cheque in settlement of daily commercial transactions a very much smaller reserve would serve the purposes of the nations. The Bank of England, the greatest finam cial institution in the world, operates with a very small reserve of gold, and yet the Bank of England is the only one of the great banks where one can make sure of obtaining gold for any amount at any time. The other banks ■of Europe have the right to pay in silver, and invariably take advantage of this right when the demands for gold are inconvenient. For: some years past the question of the Bank of England increasing its gold reserve has been the subject of magazine and newspaper articles, but as j'et no step has been'taken to bring about the suggested improvement. Naturally the Bank of England' is unwilling to store more gold, which would mean a loss of profit, and yet it. is obvious that something must be done in the matter. ■ ■' ■ •

Messes. Pixley: and Abell, the London bullion brokers, in their review of the bullion market. Bay:--• "The difficulty experienced by the Bank of England in making its rate effective is strong evidence of the necessity for some change in the system of our money market. The growing doubt as to the sufficiency of our gold reserves caused the London Chamber of Commerce to appoint a committee in February, 1908,. to examine into the whole question, and in July of last year they delivered their report. The committee recognised the desirability of strengthening the gold reserves,- and amongst their recommendations the most important was that notes issued by the Bank of England against Government debt and securities (£18,460,000) formed an undue proportion of the whole, and should be reduced." Various methods have been suggested for meeting the situation, but in none of the proposals was there any inclination to make the other banking institutions contribute to the fund. However, it seems likely that a remedy will be found. Recently the London City and Midland and another joint stock bank have started

jobbing in bar gold. ■ These institutions have bougnfc bar gold in the open market when obtainable at 775. 9d., and placed it in their own vaults, reselling the gold at a profit when foreign demands had raised the price. From the market point of view, the more extended the principle becomes the more likely are discount rates to become less fluctuating and less unstable. If a number of the joint stock banks pursue a decided policy of securing gold when it is practically at a discount in the London market, the stability of tho market ought to be greatly increased. The weakness of the free market for gold in one sense is that hitherto all the available supplies of bar gold have been held by the Bank of England, which is always attackable through the note circulation. On the other hand, joint stock banks which hold bar gold have. an absolute power over the disposal of this portion of their reserves. It cannot be taken by the foreigner, unless they wish to dispose of the gold so held. In practice it is believed the position will work out somewhat, like this: The joint stock banks which hold bar gold will stand as a ring outside the Bank of England to protect it first against foreign demands. Securing profits by selling the gold, they will in a measure meet the balance in the exchange market against London, and in all probability the demand on the Bank of. England will be diminished to that extent. If it works put in this way the movements in the bank rate should be less frequent in the future than in the past. .