GOLD STOCKS

New Zealand Herald, Volume LXXVI, Issue 23262, 3 February 1939, Page 9

GOLD STOCKS

BANK OF ENGLAND REVALUATION MOVE LEGISLATION APPEABS MARKET PEICE BASIS By Telegraph—Press Association —Copyright (Itecelved February 2, 6.5 p.m.) LONDON. F<ito. 1 Gold stocks of the Bank of Eng- - land will be written up nearly £100,000,000 as a logical sequel to January's transfer to the Exchange Fund. The value of gold afe present held by the bank's isstie department is £126,414,257, taken into the books at the old statutory prioe of £4 5s an ounce. The paper profit involved in the writing up will go to the Exchange Fund, where it will be held in reserve. The Chancellor of the Exchequer, Sir John Simon, introduced in the House of Commons to-dry a' bill to amend, the law in respect of the fiduciary issue of the Bank of England, in accordance with, the terras of the recent announcement by the Treasury. The bill was read a first time. Weekly Valuation The revaluation is provided by this bill. The Bank of England's gold and other assets in future must be valued weekly at the current market price instead of the old statutory price, which the Times' City editor describes 4 as a revolutionary change in the cur- ■ rency system. The bill further lays it down that the difference between the new . weekly valuation and the amount of notes outstanding shall be made up by transfer from the Exchange Fund to the bank or vice versa. The section of thaT l bank charter of 1844 requiring the issue of notes in return for gold will be r&pealed. The net effect of this is that the bank will have a great deal of freedom in regulating the note issue* "Valuable Step" The City editor of the Times says this vrill be the first time in the history of central banking that monetary gold a stocks have been reckoned, for cur-.'? rency purposes on the basis of the independent market price. It is regarded as a valuable and desirable step -.<■ in the development of managed cur-, rency, and is certain to arouse much interest and controversy throughout the world. The Daily Telegraph's city editor says there is nothing to imply inflation of currency and credit; on the contrary, the additional proposal to reduce the fiduciary note issue by" £100,000,000 will strengthen the currency. It was announced on January 6 that the Bank of England had sold £200,001,571 sterling of gold. The transfer represented gold preidously sold to: the bank by the exchange fund and therefore by its retransfer the bank's own gold reserve was reduced to £127,000,000 in gold worth £209,000,000. at current prices. The transfer repre- ~ sented £350,000,000 at current prices. - 2 The Treasury announced 'having mad» : a minute increasing the fiduciary issue* to £400,000,000 on representations from the Bank of England and ia conformity with the Currency and Bank Notes Act of 1928. It added that the Government was legislating to amend the 1928 Act whereby the fiduciary issue was fixed at £260,000,000' 4 The fiduciary issue was Jaxed in 1928. at £260,000,000, subject to variation.:' It was raised from £200,000,000 to £230,000,000 on December 8 last to meet Christmas currency demands. Apart from this and a similar increase' of £20,000,000 at Christmas, 1937, it had stood at £200,000,0C0 since December 15, 1936, when it was reduced from £275,000,000.