RISE IN PRICE OF SILVER.

Press, Volume LXVIII, Issue 20450, 21 January 1932, Page 6

RISE IN PRICE OF SILVER.

EVIDENCE OP BUSINESS RECOVERY. DEMAND IN THE EAST. BENEFIT TO NEW ZEALAND AND AUSTRALIA. The marked rise in the price of silver over the low avcrago for the first eight months of 1931 is being followed with keen interest as an additional evidence of improving business conditions, for silver traditionally is one of tho first commodities to advance when a depression has run its course. Selling at approximately 21d an ounce, silver recently stood in a ratio of about 65 to ono to gold, and while this is a long way from the approved 16 to one ratio it is decidedly better than that which existed last February, when the price was as low as 12d an ounce. According to the quotation from London published to-day, the metal is now up 7d above this low point. The decline in the average annual price of silver per standard troy ounce between 1920 and 1980 is shown in the following table: — <i. 1920 • • . . 61 9-16 3921 •• ..365 1922 • • . . 34 7-16 -1023 .. ..31 15-1G 1924 .. ..34 192". - . . . 32£ 1926 .. ..28 11-16 1927 .. . . 26 1-32 3 92S .. .. 26J 1929 . . . . 24 7-16 1930 . - l"l Low 1931 Prices. The decline continued into 1931, and in February of that year silver reached approximately its lowest price of 12d an ounce. Six months later, in July, 13d was still tho maximum. The rise in the prico of gold, allowed by Britain's suspension of tho gold standard, caused silver to rise in sympathy, and on November 17th the price per ounce was the highest since 1929—21 9-16 d. Although such a high price has not been maintained in the last few months, the value has never fallen much below 18d, and according to the latest quotation it is now 19 l-16d. The price of silver thus appears to havo stabilised, for the time being at least, definitely above the 1930 average.

Why silver should have become such a traditional indicator of business conditions is not very clear. Commodity prices rise after hard times because people have for so long economised and producers have cut their output so lowthat the compulsory revival of demand makes itself felt on a reduced supply. But silver is not in great demand among Western peoples, nor is the prospective reduction of new supplies such as to threaten a serious shortage. In 1930 alone a total of over 70 million ounces was put on the market from demonetised and debased coinage by various Governments of the -world.

Silver in the East. It has been suggested that silver owes its quality as a business forecaster to the fact that among Oriental nations it has a double function both as money and as commodity. Lowpriced silver has had the same effect in the East as a depreciated exchange. That is to Bay, the Indians and Chinese have had to pay dear for imports because they paid in cheap silver, and exports have had an advantage because foreigners paid in silver. The fall in prices has been a cruel burden, but it is said to be producing its orthodox effect —a favourable foreign-trade position. Ultimately, India and China may so succeed in reorganising their trade that they are able to produce a surplus of exports; and this surplus can be converted into the metal which they value so highly and for which the demand is consequently increased. . This suggestion is illustrated by the fact that in the difficult year of 1930 India is estimated to have taken over 94 million ounces of silver, the largest total since 1925. This substantial consumption was made possible by tho fact that although India's command over foreign money, through her exports, was soverely reduced, the price of silver was also severely reduced. A similar consumption of silver, it is reported, is going on to-day, foreshadowing the return of purchasing power to tho millions of the East and, consequently, a great impetus towards business recovery throughout the world. A Considerable Benefit. Such an increase in the x n "i- ce °f silver as has occurred during the past twelve months tends to stimulate business in other ways, notably by increasing the market value of the metal in all the silver-producing countries. New Zealand, though a relatively unimportant centre of production, exported silver to the value of £41,275 in 1929 and of £44,534 in 1930. If the metal appreciates by as much as 40 per cent., as it has done since last February, the increase in the value even of this small export is considerable. It may be noted that almost all the silver exported from New Zealand, amounting in value to £3,189,674 to the end of 1930, has been obtained from tho refinement of bullion from the quartz-mines, principally those of the Hauraki goldfield, where gold and silver are found alloyed. In a country such as Australia, where silver is among the chief exports, an increase in the price of the metal is of the greatest importance. The present rate of production by the three leading Broken Hill companies is about six million ounces a year, upon which the rise of 7d an ounce in sterling (including an exchange premium of 30 per cent.) is equal to £227,500. Taxation will be practically the only expense to set off against this increase in the companies' earnings. For each variation of Id an ounce in the price of silver their earnings fluctuate by about £32,500 (including the exchange premium). The other chief producers of silver who will reap the benefit of the increased price are Mexico, the United States, Canada, South America, and Southern India.