PRECIOUS CARGO

Evening Post, Volume CXV, Issue 58, 10 March 1933, Page 7

PRECIOUS CARGO

TRANSPORTING GOLD

GREAT CARE NECESSARY

SHIPMENTS TO AMERICA

The shipments ■of gold, representing the- December instalment of the British war debt to the United States, have directed attention ,to the system of transporting such "cargo." Many details enter into such transactions and all arrangements must be carried out with great precision, for speed is extremely important (states the "New York Times"). The loss of a few hours may mean wiping out a day's interest, and where millions are involved one day's interest is a substantial sum. The operation is generally accomplished with secrecy to avoid theft risk: Gold shipments may originate in two ways. They may be transactions between Government and' Government, or between a private pa.uk and its correspondent overseas. In the case of a Government, such as that of Great Britain, the reserves of the Bank of England are drawn upon for the necessary metal. When a private bank in New York wants gold shipped frqm London it may order its London office or correspondent to buy the metal in the open market. In the case of shipments from Paris to private bankers in America the gold probably comes largely from the stores of the Bank of Prance. French currency being on a gold basis, the owner of francs can change them into gold and ship the metal to New York when the exchange rate makes this transfer profitable. . KEGS AND BOXES OF GOLD. In the shipping operation the metal is usually packed in small "herring" kegs holding about £10,000 each, built strong enough to withstand swift handling, or in "boxes containing five gold bars, valued at a total of about £8000. Gold shipments are made either in bars or coins, the latter being more difficult to transport as they are harder to handle and there is a certain amount of loss though abrasion. ■ .}' ■ The specie removed from ""the bank vaults is placed in armoured cars accompanied by armed guards, and carried aboard ship. Here it is placed in the bullion room or strong room, generally in the hold of the vessel, and the purser is responsible for it. The strong, room is usually steel-lined and fireproof, and is sealed for the duration of the voyage. ■ ■ - The ordinary bill of lading accompanying the shipment is, of course, in the mail aboard the vessel carrying the gold, but to' await its delivery by the post office would entail too much delay. To avoid this, the shipper gets from the steamship company an extra bill of lading.or "carrier's certificate." With this certificate the consignee goes to the Custom House and arranges for the clearing of the shipment, obtaining a permit to take the .gold off the ship on its arrival. The Customs inspection is a mere formality, as the metal is not dutiable. Theshipper arranges to"have armoured trucks' and guards waiting at, the pier to receive the metal and' engages cooperage services to unpack it. The trucks are bullet-proof and have windshields of bullet-proof glass. Guards are at the gun-slits, with revolvers and sub-machine guns. When the metal is delivered, armed guards cover the operation. The gold, taken from the strong- ■ room of the ship and put on the trucks, may be conveyed either to the Assay Office or to the Federal Beserve Bank. If it is in the form of foreign gold coins it will go to the Assay Office. Here the boxes or kegs are opened and the coins are taken out and melted, enough copper being added to bring the metal to the , American monetary, basis, an alloy of 900-1000 fineness. Although gold-bar shipments may be taken to the Assay Office, opportunity is given to the Federal Beserve authorities to say whether they prefer to receive the metal. Even if a private bank has ordered the gold, it will go to the Beserve Bank or the Assay Office and the bank will be credited. In either case tho gold must reach the depository before 3 p.m.; otherwise it will not be accepted, and a day's interest will be lost. INTEREST AND-INSURANCE. Among the principal factors which must be taken into consideration when a gold shipment is arranged are the following:—Loss of interest while the metal is en route; cost of shipping, including the actual transportation, trucking at tho port of embarkation . and at the port' of arrival, usually amounting to about one-fourth of 1 per. cent.; cooperage'upon departure and receipt, and insurance. The question of insurance involves not merely the rate, but whether or not the-vessel on which shipment is to-be-made is still insurable.-It has occasionally happened that a bank has arranged all the details of a gold shipment only to find that an unusually high rate is being asked by insurance underwriters for the reason that the ship on which the metal is scheduled to be sent is carrying other precious cargo, such as diamonds, on which heavy insurance has been taken out. The amount of. insurance which the underwriters will place on a particular ship depends, of course, on the size of the vessel, a higher amount being available on one of the new, largo liners than on a smaller and older ship. If a heavy consignment of bullion and precious stones is made on one ship the insurance Tates are raised. This was the case with the liner Majestic, which recently carried a cargo of about £.4,000,000 in gold. Insurance rates oh this vessel jumped, according to news reports, from the usual. 1 shilling per £100 to about 6 shillings per £100. Few ships will transport more than £3,000,000 in precious cargo and for this reason the gold of the British war debt was sent over in nine modern liners. Freight and insurance on the entire debt instalment amounted, it is estimated, to about £60,000, The gold room of tho Federal Boserve Bank in Manhattan, where imported gold eventually comes to rest, is an imposing treasure house, eighty. five feet below the street level. Its outer wall is made of steel and concrete more than eight feet thick, and is entered by a four-foot passageway through a nine-foot steel cylinder. PACIFIC SHIPMENTS. Most of the gold sent to the eastern part of the United States is landed at New York, while San Francisco is 'the principal gold receiving point for the west coast. On account of the expense, gold is rarely transported to New York from the' Pacific Coast, the Assay Office in San > Francisco performing the same functions as the New : York Assay OfficeThe acquisition by the Federal Beserve of £19,000,000 in English gold meant that the United States ended the year 1932 with no net loss in its monetary gold stocks, despite heavy withdrawals by foreign central banks earlier in the year. The enormous gold hoard of the United States had its beginning in the early years of the World War, before the country was drawn into' the struggle. European nations .bought heavily, from America, and. paid in gold

because their exports were inadequate. The reserves of the .United States increased from about £360,000,000 in 1914 to about £640,000,000 in 1917. The next great influx of the metal took place from 1921 to 1924, : due primarily to the flight of capital from Europe. The demand for dollar drafts was met in part by the exportation of gold to America. At the end of 1924 America's gold reserves were about £900,000,000. The third pronounced movement of gold to the .United States began in 1929, the reserves mounting from about £820,000,000 at the first of the year to about £1,000",000,000 in September, 1929. Withdrawals during the following weeks reduced this figure by £140,000,000. In 1931 America lost about £15,000,000 net, and from £892,000,000 at the end of 1931 the monetary gold stocks of the country were drawn down-to £781,800,000 on June 15, 1932. At that time the gold tide turned, and from then until late in November, 1932, the United States gained more- than £80,000,000 net in gold on combined export, import, and earmarked account, bringing the reserves to about £872,500,000. ' EARMARKING OF GOLD. The process of earmarking gold consists simply of tagging it with the name of the receiver and setting it aside, in the vaults of the paying bank, for his account. In the case of the recent payment of the British debt instalment by the Bank of England to the Federal Beserve Bank of New York, the metal was merely moved ten yards, there to await shipment, to America. In the Federal Beserve Bank and most other institutions, each lot of earmarked gold is placed in a separate compartment or strongroom.