STOPPING GOLD RUSH Major Banks Ban Private Buyers

Press, Volume CVIII, Issue 31632, 19 March 1968, Page 15

STOPPING GOLD RUSH Major Banks Ban Private Buyers

(N.Z.P.A.-Reuter—Copyright) WASHINGTON, March 18. In a historic decision Western world central bankers last night locked their vaults to staunch the massive flow of gold to private speculators. The seven active members of the gold pool introduced a two-tier system of selling to replace the old system under which gold was available through the banks at SUS3S an ounce.

After 14 hours of intensive secret negotiations the bankers —from the United States, Britain, Belgium, the Netherlands, Switzerland, Italy and Germany—announced. a wide-ranging series of measures designed to bolster the monetary system and stop the run against the United States dollar and the pound sterling.

They made clear that there would be no increase in the official price of gold, which will be maintained at $35 an ounce. Speculators and private investors will have to buy their gold from other sources at fluctuating prices on a “free” market.

In Zurich, Swiss banking circles emphasised that the new system would not necessarily mean a big victory for the speculators.

“The price will obviously rise initially on the free market but after a time it could well settle to a lower level than many people suspect.” Sales of gold from their monetary stocks to all private markets were cut off and they no longer felt “it necessary to buy gold from the market”, acording to a statement issued at the end of the central bankers’ meetings.

This last measure was intended, officials said, to prevent those who speculated in gold from ever realising a profit. '

International Account

The United States made clear it would continue to buy and sell gold at SUS3S an ounce in transactions with foreign monetary authorities to settle international trade and financial accounts.

This means, the bankers said, that they were co-operat-ing to maintain the existing parity relationships of the 107 countries which are members of the International Monetary Fund.

Dealing with the recent continuing pressure on sterling and with expected turmoil in foreign exchange markets in the next few weeks, they agreed on a massive increase in their currency exchange arrangements. The United States Federal Reserve Board said that it was increasing by $2275 million to a total of $9355 million arrangements it maintains with 14 central banks for exchanging currencies when the money of one of the participants comes under pressure. The bankers agreed “in view of the importance of the pound sterling” to provide

approximately an extra SUSIOOO million backing to Britain to meet any further pressure. The central bankers also agreed that “henceforth they will not sell gold to monetary authorities to replace gold sold in private markets”. Major Condition? Observers said that this indicated the United States

might be attaching a possibly major condition to the convertibility of the dollar. Sir Leslie O’Brien, governor of the Bank of England, who described the bankers’ decision as “a good result —a unanimous result”, said in explaining why today’s measures were not taken earlier that the “reluctance of the Americans, in effect, to control the convertibility of the dollar” had to be understood.

A spokesman for the Federal Reserve Board declined to comment on Sir Leslie O’Brien’s statement other than to say that the United States was not controlling the convertibility of its currency any more than the other countries represented at the conference. London Pool

Sir Leslie O’Brien said that the decisions taken in Washington meant the virtual dissolution of the London gold pool which had operated since 1961 in stabilising all gold trading at SUS3S an ounce. “They have seen the last ounce of gold from monetary reserves at least through the medium of the pool,” he told a press conference.