Gold Hoarders Active Since Korean War Began

Press, Volume LXXXVII, Issue 26524, 12 September 1951, Page 7

Gold Hoarders Active Since Korean War Began

(N.Z. Press Association—Copyright)

WASHINGTON, September 10.

Gold rushes by hoarders after the outbreak of the Korean war, and investment in industrial or artistic projects, diverted half the world’s gold production away from international money markets in 1950, according to the annual report of the International Monetary Fund.

This happened in spite of the opposition of the fund to any agreement permitting more gold to flow into free markets. Non-monetary uses claimed three-quarters of the global output in the second half of last year after the Korean hostilities hud started, compared with one-quarter in the first six months.

In the last year sales of gold by South Africa for industrial and artistic purposes increased markedly, and part of this gold doubtless found its way into premium markets for hoarding purposes.

In addition, France and some other countries sold gold from their monetary stocks to abate domestic and inflationary pressures.

These supply factors, contrasting with the supply situation before the sterling bloc devaluations two years ago, were part of the explanation of the markedly lower prices for gold recently.

Against a notable decline In the amounts of world gold output entering the monetary reserves, the report slid, the International Monetary Fund is adopting a new policy for use of its huge resources. In future the fund will use its money to help any country willing to run greater risks in removing exchange controls and dollar discriminations. Sterling has become a much harder currency and exchange controls, particularly dollar discriminations, should be relaxed whenever possible, says the report. The agreement, with its member countries, provides that by next March —five years after the fund started operations—any member country retaining exchange controls oh current payments shall consult the. fund about keeping them. The report complains that the fund’s resources had not been sufficiently used as a medium”of promoting international financial stability.

Loan to Brazil In the last two years the only business done by the International Monetary Fund, an institution costing £1,142.800 a year to run, has been to provide £10,000,000 to Brazil. Balance of payment uift.culties are no longer as acute as they were, but world-wide inflationary tendencies have created new problems Carrying the seeds of future payment difficulties. The report argues that the widespread upvaluing of currencies will be as ineffective in solving the inflation problem as Widespread deflation was for solving the deflation problem in the 1930’5. • The fund reaffirms its belief in its system of having fixed par values for currencies of member countries and indicates that fluctuating rates will be particularly serious to sterling. At 250 s an ounce the world gold output in 1950 was about £303,570,000, compared with £234,635,000 in 1941 and £264.280,000 in 1945. This was still about one-third below the 1940 peak. Canada and South Africa are already up to over four-fifths of their previous peaks in annual production, but the current output in Asia is only onequarter, and in Australia and the United States only about one-half of the 1940 production. Most of the increased output in 1950 was in the United States and Canada.