GOLD VALUES.

Hawke's Bay Tribune, Volume XIII, Issue 71, 7 March 1923, Page 4

GOLD VALUES.

Th e question of currency deflation, upon which Mr. Reginald McKenna was quoted in this coTuffin a few days hack, is closely related to the suggestion that ere very long wo may get back to a gold-coin circulation. This, in turn, must reflect upon the goldmining industry in which an effort is being made to stimulate interest in this country. This aspect of the position was recently discussed at a meeting of the Australian Gold Producers’ Association, when the chairman ventured an opinion that upon the question whether the surplus of gold in the United States and in some other countries would be sufficient to meet the needs of various countries as they, one by one, returned to a gold standard, would largely determine the future .attractiveness of the gold ffiinirig industry, Commenting upon this, a Sydney financial writer says that it would have been better to say that upon the future value of gold depends that attractiveness. Gold, he says, is riot as valuable now as it was in 1913 or 1914. this may seem a paradox inasmuch as in our own currency gold is at a preu mium, although that premium is today small. Yet the value of gold is not expressed in the aihount of papei currency which it. will buy. but rather in the quantity of goods for which a given quantity of the precious metal may be exchanged. It would need some calculation to show that’the' value of gold has depreciated if we consider only English or British Dominions prices, because we are not now on a gold basis, and prices have varied through our paper currency being at a discount as well as through any fall which may have occurred in the value of gold. The United States is the only country wliich has still a gold standard, and a free market for gold, consequently it is the only country where prices directly show the value of gold.

Comparing the index commodity prices in America it is shown that there, making a comparison with 1921, the value of gold in 1922 depreciated a little over 6 per cent., but compared with 1914 the value of gold in 1922 depreciated by 36 per cent. Goods which would hav<> cost in round numbers 9 dollars gold in 1914 required, in 1922 12 dollars in gold to purchase them. How it is asked, has this fall in the value of gold came about? During the years preceding from 1896 there w;» slow but continuous depreciation. That was due to th© very large increase in the production of gold from the earlier period, but from 191,4, tp 1922 there was in the aggregate a very marked decrease in production. If this had occurred in normal times gold, following on the analogy of the previous years, would have increased in value. We have seen that actually it decreased, and it decreased for the reason that during those years .there was less employment both for the gold already produced and for the new gold. Statistics which have been gathered from various sources show an increase in the public gold' reserves of the countries mentioned’ amounting to 3589 million dollars. Of the gold production during this period 1670 million dollars is considered to have gone into the banks, leaving .about 1900 million dollars unaccounted for. The unaccounted for amount could only have coihe to the banks by being withdrawn from circulation in the countries of Western civilisation. It will thus be seen that not only was there no new gold required for circulation. but the gold in circulation in 1914 practically all went back to the banks. Sellers of new gold had. to meet the competition of gold withdrawn from circulation, the demand for gbld was lessened, so its value fell. The employment of paper as. the ~hief currency of the country will tend to retard gold regaining its value, even though a gold standard should be adopted Further, it lias been the practice. of the Central banks to*huild upon thteir augmented gold reserves an everincreasing quantity of means of payment, and this newly-created purchasing power could not help, forcing up the price level of commodities in the currency affected thereby. This is equivalent to a reduction in the purchasing poWer of gold. These figures and the new conditions of the employment of gold supply a reason why the winning of the metal is not such a payable proposition as it was nine rears ago.