SHRINKING GOLD RESERVES.

Timaru Herald, Volume CXXV, Issue 18330, 30 July 1929, Page 9

SHRINKING GOLD RESERVES.

Financial Circles Perturbed. RISE IN BANK RATE LIKELY. (United Press Association —By E’ectrlo Telegraph—Copyright ) LONDON, July 27. The week ended July 20 was very gloomy on the Stock Exchange owing both to the fall of prices and the serious shrinkage of business. A much more confident tone developed early this week, although there was no appreciable improvement in the quantity of the business. Liquidation was much less persistent than recently, while sentiment was favourably affected by Mr Philip Snowden’s cautious reassurance at the Bankers’ Banquet. The financial papers admit that this speech was partially responsible for the maintenance of the bank rate unchanged, despite the gold position. They have not omitted to express the irony of the situation, a Socialist Chancellor of the Exchequer being able temporarily to buoy up the market. Gold Withdrawals. Yesterday, however, Stock Exchange conditions again weakened owing to the growing seriousness of the monetary outlook, for there was a further gold efflux to the Continent, reducing the Bank of England’s holdings to approximately £147,750,000. Since June 18 the net gold withdrawals total £17,316,000, an average of £500,000 a day. Germany has taken £11,500,000, France £6,500,000, and America £2,250,000. Thus the Bank of England’s laborious work of building up gold reserves since the advanced discount rate of February has been practically all undone within a few weeks, and it faces the autumn with its stock of metal much below the quantity regarded as necessary at this season of the year. Moreover, the gold exports failed in their chief object of turning foreign exchanges in favour of sterling. In these circumstances it is no wonder that the depression of giltedgeds has been almost acute during the past week. Many interests are now inclined to view a’ 6 per cent, bank rate as inevitable and would welcome an announcement to this effect as likely to relieve the uncertainty. During the week the underwriters were left with 78 per cent, of the £2,000,000 British Guinea 5 per cent. stock, issued at £9B, while the average rate of allotment of Treasury bills yesterday was £5 9s 1.85 d. per cent., the highest level since June, 1921. Foreign Trade. “The Economist,” commenting on Britain’s foreign trade for the first half of 1929, says: “Apart from the set-back of June, the returns can be considered encouraging. Exports show a 1 per cent, increase over the first half of 1928 and the excess of imports over exports showed a 1.6 per cent, in-, crease. These percentages may appear insignificant, but an important qualification must be borne in mind, namely, that during the past year wholesale prices have fallen by 9 per cent, and so, if the trade figures were expressed in volume instead of value, there is little doubt that the 1929 returns would reveal an appreciable increase over last year. An instance thereof is furnished in the re-exports. These showed a 10 per cent, decline compared with 1928, but a substantial item of the British re-exports is rubber, which is now only half the price it was a year ago.”

Wool Prospects. The wool sales which closed this week were of critical importance to the industry. They were somewhat disappointing, the slackness in the general demand and the large withdrawals and the competition for merinos, both from France and Britain, being conspicuously weak. The whole of the European industry is wearily waiting for new orders and is only slowly reducing its heavy stocks of raw material until new orders for manufactured goods are forthcoming. There is no prospect of better conditions. The most hopeful present factor is that cheaper wool will create its own demand in finished goods. As the nett effect of the variations in the past year, wool values are now 25 per cent, below those of a year ago. Among the reasons must be included the competition of artificial silk, which is being increasingly used for men’s as well as women’s garments. Another factor restricting consumption is undoubtedly the heavy toll by merchant retailers before the consumer is reached.