GOLD AND FEAR

Evening Post, Volume CXXIII, Issue 134, 8 June 1937, Page 12

GOLD AND FEAR

AMERICA'S PROBLEM

EMBARRASSMENT OF RICHES

'Evening Post," June 8.

Since March last, when it was quoted at 142s 3Jd per.ounce line, the price of gold has fallen by 2s per ounce and the market-since April 21-has not been reported as reaching 141s. Yesteiday the price was 140s BJd. Fears were recently expressed that in.order to meet the conditions caused by the influx r.f gold '-j the United States that the price of the metal would be reduced. Towards (he end of April last reports were current in New \ovw and London that President Roosevelt and his economic advisers were considering, positive measures to check the flow of gold from abroad. Tne Administration is convinced, it was reported, that a situation that permits other nations virtually to dump their gold in America and requires the Treasury to borrow money to pay tor it must be corrected. Their plan gave foremost consideration to an import tax or licence fee of sufficient size to deter imports. ' This was equivalent to a reduction of the Treasury's buying price, and might have accounted ior the rumours that the price was to be reduced. AN OFFICIAL DENIAL. The President denied the reports or rumours of steps having been considered, much less taken, by the Administration that would involve reduction in the price of gold. Subsequently Mr. Havenga, Minister of Finance for the South African Union took the opportunity while m London of issuing a statement to the effect that the permanent factors governing the gold position did not justify fears of reduction in the price of gold, care-less-and unwise speculation, he saia, "must be condemned." He was convinced that the outlook for gold mm"ftTsVue^hat the United States has half the gold now held in the woild, and, according to authoritative opinion, it is embarrassed by its wealth. " PRESIDENT'S DILEMMA. The United States is receiving the bulk of the gold for sale. It has too m The Resident cannot reduce the price without disturbing the exchanges and initiating a deflationary move. He is willing to go on buying gold and storing it away. If he decided on an import duty he must make-the amount of the tax enough to discourage sellers abroad; too small a tax might still leave the American price above what othei nations would pay. Top large - a tax might bring it below, in which case America would lose gold. . ' President Roosevelt* denials of we reports of any intention of the Umte.. States to do anything to reduce Jhe price of gold did. something to dispel fears on that account and to restore values of gold-mining shares which had come down with a run following the circulation or rumours. Fear has again,seized holders of gold —many of them nationals of Continental countries—and investors. The London gold market closed last week in what was described, as a. state of panic, Sa on Friday £7.000,000 in goldl was "flung" on the market. Again President Roosevelt was c°nf rf™ eV£ited peat-his assurances that the United States policy would not be changed. That is where matters now stand as to America's gold holding and its attitude towards the gold market. PRODUCTION INCREASE. Not only have gold coins long been withdrawn from circulation in Great Britain and the Dominions, .but production of gold has greatly increased ,-under the stimulus in Australia and New Zealand of the depreciation of the currency and Government assistance to the gold-mining industry. World production of gold in 1936 was 35,000,0000z, compared with 30.984,0000zin 1935 and 20,836,0000z in 1930. South Africa, Canada, the united States, Australia, Southern Rhodesia, Japan and Korea, New Zealand, and many other countries all show increased production of gold. A fall in the present value of gold at say £7 per fine oz would-inevit-ably result in the closing down of many mines and "shows" of various kinds such as dredeing and sluicing, and especially of low-grade mines. Fears of investors, however, now present a new aspect. The demand is for sterling or similarly good value in exchange for gold which may be worth less than £7 per fine oz. Present conditions are unsettling in finance and. indirectly, in commerce and industry. A statement of the policy of the British and the United States Governments as -to the present and future, of gold is.called.for and is a matter of urgency.