RISE IN PRICE OF SILVER

Evening Star, Issue 21007, 22 January 1932, Page 12

RISE IN PRICE OF SILVER

♦ , EVIDENCE OF BUSINESS RECOVERY DEMAND IN THE EAST The marked rise in the price of silver over the low average for the first eight months of 1931 is being followed with keen interest as an additional evidence of improving business conditions, for silver traditionally is one of the first commodities to advance when a depression has run its course (cays the Christchurch ‘Press’). Selling at approximately 21d an ounce, silver recently stood in a ratio of about 65 to 1 to gold, and, while • this is a long way from the approved 16 to 1 ratio, it is decidedly better than that which existed last, February, when the price was as low as 12d an ounce. According to the quotation from London published to-day, the metal is now up 7d above this low point. The decline in the average annual price of silver per standard troy ounce between 1920 and. 1930 is shown in the following table: — ff.' 1920 61 9-16 1921 ... ... 36 7-8 1922 ... 34 7-16 1923 ... 31 15-16 1924 ... ... 34 1925 ... . 32J--1926 ... 2811-16 1927 ... ... ... ... 26 1-32 1928 ... 262 1929 24 7-16 1930 172 LOW 1931 PRICES. The decline continued into 1931, and in February of that year silver reached approximately its lowest price ,of 12d an ounce. Six months later, in July, 13d was still the maximum. The rise in the price of gold, allowed by Britain’s suspension of the gold standard, caused silver to rise in sympathy, and on November 17 the price per ounce was the highest since 1929—21,9-16 d. Although such a high price has not been maintained in the last few months, the value has never fallen much below 18d, and according to the latest quotation it is now 19 l-16d. The price of silver thus appears to have stabilised, for the time being at least, .definitely above the 1930 average. Why silver should have become such a traditional indicator of business conditions is not very clear. Commodity prices rise after hard times because people have for so long economised and producers have cut their ' iitput so low that the compulsory revival of demand makes itself felt on a reduced supply. But silver is not in great demand among Western peoples, nor is the prospective reduction of new supplies such as to threaten a serious shortage. In 1930 alone a total of over seventy million ounces was put on the market from demonetised and debased coinage by various Governments of .the world. SILVER IN THE EAST. It has been suggested that silver owes its quality as a business forecaster to the fact that among Oriental nations it has a double function both as money and as commodity. Lowpriced silver has had the same effect in the East as a depreciated exchange. That is to say, the Indians and Chinese have had tc pay dear for imports because they paid in cheap silver, and exports have had an advantage because foreigners paid in silver. The fall in prices has been a cruel but it is said to bo producing its orthodox effect—a favourable foreign trade position. Ultimately India arid China may so succeed in reorganising their trade that they are able to produce a surplus of exports; and this surplus can be converted into the metal which they value so highly and for which the demand is consequently increased. This suggestion is illustrated by the fact that in the difficult year of 1930 India is estimated to have taken over ninety-four million ounces of silver, the largest total since 1925. This substantial consumption was made possible by the fact that although India’s comnwjnd over foreign money, through her exports, was severely reduced, the price of silver was also severely reduced. A similar consumption of silver, it is reported, is going on to-day, foreshadowing the return of purchasing power to the millions of the East, and, consequently, a great impetfls towards business recovery throughout the world. A CONSIDERABLE BENEFIT. Such an increase in the price of silver as has occurred during the past twelve months tends to stimulate •business in other ways, notably by increasing the market value of the metal in all the silver-producing countries, New Zealand, though a relatively unimportant centre of production, exported silver to the value of £41,275 in 1929 and of £44,534 in 1930. If the metal appreciates by as much as 40 per cent., as it has done since last February, the increase in the value even of this small export is considerable. It may bo noted that almost all the silver exported from New Zealand, amounting in value to £3,189,674 to the end of 1930, has been obtained-'from the refinement of bullion from the quartz mines, principally those of the Hauraki goldfield, where gold and silver are found alloyed. In a country such as Australia, where silver is among the chief exports, an increase in the price of the metal is of the greatest importance. The present rate of production by the three leading Broken Hill companies is about six million ounces a year, upon which tlie rise of 7d 'an ounce in sterling (including an exchange premium of 30 per cent.) is equal to £227,500. Taxation will ho practically the only expense to set off against this increase in the companies’ earnings. For each variation of Id an ounce in the price of silver their earnings fluctuate by about £32,500 (including the exchange premium). Tiie other chief producers of silver who will reap the benefit of the increased price are Mexico, the United States, Canada, South America, and Southern India., '