THE BUYING AND SELLING OF GOLD

Otago Daily Times, Issue 22022, 3 August 1933, Page 10

THE BUYING AND SELLING OF GOLD

TO THE EDITOR. SiR, With reference to your footnote to my letter in to-day’s issue, unfortunately the best authorities agree neither with your scepticism nor with your statement that it is a long time since the Bank of England bought gold at £3 17s 9d per standard ounce.' The Financial Times, which is- the largest financial journal in the Empire, said on March 14: “Some muddle-headed impressions have arisen from the Bank of England’s acquisition so far this year of nearly 11,000,000 ounces of fine gold worth over £44,000,000 at the old par value, on the basis of which the metai is taken into the weekly returns. it does not seem to be even yet generally realised that the balance between this sum and, the actual cost in sterling of approaching £66,000,000 has been debited to the Exchange Equalisation Fund. , . . The bank has never been released from its obligation to buy gold which may be tendered to it at 77s 9d per standard ounce.” „ The same paper on March 15 said: “ The Bank of England has not been able to buy gold of its own volition since Great Britain suspended the gold standard in September, 1931. What has happened is that the Exchange Fund, when temporarily overloaded with dollars, francs, and occasionally other gold par currencies, has claimed gold for them from the appropriate central banks. The fund has then put all or most of the gold so obtained on the Bank of England at the price of 77s 9d per standard ounce, at which it is bound to accept the metal. It would not be worth while to alter the bank’s standard price until sterling has been restabilised.” Those who have been in touch with world monetary conditions have realised that for the past nine months world conditions have been “bulling” sterling, while the British Government through the Exchange Equalisation Fund, for trade reasons, has been “bearing" sterling. This hag meant that the Exchange Fund has had to be a constant seller of sterling, and fresh supplies could only be obtained (if sterling was to be kept down) by selling gold to the Bank of England. Hence my statement that the loss was inescapable as long _as the bank’s buying rate for gold remained unchanged.—l am, etc., KUSEVELD. Kurow, (July 31.