THE MOVEMENT OF GOLD

Evening Post, Volume CVI, Issue 82, 16 October 1928, Page 10

THE MOVEMENT OF GOLD

A question raised during a discussion which took place at the Chambers of Commerce Conference yesterday in regard to the return to the gold standard was submitted by "The Post'? to a well-known banker for his opinion on the proposal. It was asked, in reply, What importance can be attached to the views of Mr. Turner, who introduced the matter, seeing that he said lie did not know what the cost of shipping gold would be? But this item, is the crux of the position." "Had Mr.-Turner (said the banker) asked for a quotation from a shinpinw company for froight and from an insurance company for insurance, oa a shipment of gold to London, and added thereto a moderate sum for sundry costs of shipping, he would have found that it costs about three times as much to ship gold as to buy a draft on London payable on demand. "As to the buying rate of the banks for drafts on London, payable on demand, which at present is 10s pcr1 cent, discount. On the average it is about 36 days between date of purchase of a draft in Now Zealand and date of payment of the draft in London. Interest for 36 days at 5 per cent, is 9s lOd, Therefore, whilst the demand buying rate is 10 per cent, discount, the banks .'ire earning the merest trifle over 5 per cent, on their money by this business. "The cost of exchange on London, both buying and selling," could be substantially reduced if the daily purchases and sales balanced, lint that is never the case; and at certain seasons of the year 'the purchases enor-.' mously exceed the sales. When exports largely exceed imports, as in the past season, the result is a large accumulation of funds in the hands, of the bank;s in London, on which pending adjusrtment (often spread over, perhaps, a year or more) the interest'return averages about 3? p.c. . "As to the system of exchange Ijetivcen Egypt and London," stated 'the authority, "it must be understood that conditions in Egypt and New Zoa.lancl are entirely dissimilar. If New Zeii.laml y would adopt in its entirety the 7Egyptian system of banking, doubtless the banks here would bo quite agreeable: the profits of the National BariJc' of Egypt enabled it recently to pay a dividend of 26 per cpnt., and previously, for some years, 17 per cent! "The delegate who remtirkefi at the. conference 'It seems to me -fvc are treading where angels fear to tread,' put the position in a nutshell--not that lwinkcrs claim to bo regardrjil as an~nls!" ' ,