'BAD AS THE WAR’

Dominion, Volume 30, Issue 167, 12 April 1937, Page 9

'BAD AS THE WAR’

Chaos on Stock Market at U.S.A. Rumour ROOSEVELT AND GOLD President’s Denial Causes Scramble to Cover OUTLOOK MUCH BRIGHTER By Telegraph.—Press Assn.— Copyright (Received April 11, 6.30 p.m.) London, April 10. “As bad as the war” was one broker’s description of the market chaos which culminated in frantic dealings in the street as bears scrambled to cover following President Roosevelt’s denial that he intended to reduce the buying price of gold. The violence of the fluctuations is illustrated in the case of West Witwaters and Rands, which were offered as low as 134 on Friday and recovered on the street to 15 LS. compared with 17 5-8 a week ago. Tile rumours have been most costly. At one time the market value of a wide range of shares must have depreciated tens of millions sterling. Not only speculators, but also serious investors, whose nerves were unequal to the strain, were involved in heavy losses. There lias been bitter criticism in the city of American methods, yet it is admitted that President Roosevelt has achieved one of his main purposes with remarkable economy and energy, namely to damp down speculation. A leading financial authority told the Australian Associated Press Agency that President Roosevelt uses a mouse to do the work of an elephant. He whispers "Down,” and the markets blindly follow, without, considering whether he has power to enforce his wishes.

Gradual Recovery Expected. The “Financial Times” considers that while the President’s statement has not wholly undone the damage, the world’s markets probably have been saved from a panic on Monday The outlook is now much brighter. Good gold shares should gradually recover, though the long-term outlook is no longer clear. The market should enjoy a respite from exchange fluctuations, with the franc destined to settle down around 112. Commodity movements should also be less wild. The market’s chief anxiety in weeks to come will lie to avoid being caught with tho' wrong foot off (lie ground. Nervousness in the bullion market. Ims b.v no means been completely allayed. The exceptionally large amount of £14,200.000 worth was sold on Saturday morning at a discount of 3d. on American parity, indicating the nervousness of holders. The city editor of “The Times” considers that President Roosevelt’s declaration should suffice to reassure the markets that an important change in American gold policy is not contemplated. Cotton Resists Panic. The Sugar Conference fixed the free market at 3.170.006 tons. Hard bargaining over quotas is inevitable, the realisation of which, combined with Paris selling, led io the price declining 24(1. Cotton resisted the panic, indicating that its statistical position is stronger. It is generally believed that the consumption goods outlook appears moderately favourable. DENIAL BY ROOSEVELT “Reports Originated in Foreign Press” (Received April 11, 5 p.m.) Washington. April 10. President Roosevelt denies that the United States Treasury plans to lower to 35 dollars au ounce the price of gold. He insisted that reports to that, effect originated in the foreign Press on April 7. The price of gold in the United Slates is fixed at 35 dollars an ounce, al which level it has stood since .January 31, 1934. President Roosevelt has power to reduce this price b.v a further 55 cents per fine ounce. Fears that this power would be exercised, however, have generally been regarded as ill-bused. In the latter part of last year the President referred to the provision as “emergency powers,’’ the clear implication being that only in exceptional circumstances would they he used. Russian production of gold has increased enormously in the past few years. Last year Russia's output was 7,350,000 tine ounces, compared witli (>,831.000 ounces in the previous year, and tier total was second only to that of South Africa. Only recently the claim was advanced that witilin a comparatively short time Russia would replace South Africa as the worlds largest gold producer.

DEVALUATION OF FRANC Rumour Current in London London, April 9. Francs are being freely offered at 109 1-8 to the pound sterling. A story is current in the City that the franc will be devalued to 112 to the £ and that simultaneously President Roosevelt will raise the value of the dollar to the legal maximum by modestly cutting the price of gold to 34.35 dollars a fine ounce, enabling a return to be made to the old sterling parity of 4.86 dollars to the £. The equivalent Lon don price of gold will then be round 141/-. Liquidation of gold shares has almost assumed panic proportions, the largest falls being sustained by companies which are at present at the development Other larkets are dull. The selling of “kaffirs” (South African gold-mining shares) was resumed this afternoon. Despite occasional buying by bargain-hunters, the shares closed at the lowest levels >f the day. The franc also weakened in the afternoon despite the statement of the French Minister of Finance. M. Auriol. denying France's intention to devalue the franc.

An unusual departure from established practice was the fixing of the gold price on the London bullion market without relation to the dollar chipping

parity and on a basis of demand and supply alone. MINISTERIAL DENIAL No Devaluation of Franc \ Paris, April 9. The Minister of Finance, M. Vincent Auriol, conferred with the Exchange Equalisation Committee, after whichhe denied reports that France would allow the franc to fall below the legal limit of 111 to the £ sterling. He also denied that modification of the three-rower Agreement was imminent, and declared that there was no reason for disquiet owing to exchange lluct nations, in regard to which the Equalisation Fund would take appropriate measures. EFFECT IN AUSTRALIA ••■x-eived Anril 11. <1.30 n.m.' Sydney, April 11. On (lie Sydne Steck Exchange the uncertainty regarding the attitude of America which, it is reported con templates cutting the price of gold dras rieally is having a depressing effect on several stocks. Electrolytic zinc prices receded sharply. Barriers and Mount Lvell sdiares also eased.