BUYING GOLD

Waipa Post, Volume 44, Issue 3181, 24 May 1932, Page 2

BUYING GOLD

THE TRADE OF THE BULLION DEALER. (By Arnold Black, in the Rand Daily Mail.) Swords of honour, ducal coronets, antique ornaments,, medieval coins and immense numbres of sovereigns have, we learnt in the past few days, been pouring into the offices of the English establishments carrying the unfamiliar description of " bullion dealers." Theirs is a profession of which the average South African has heard little, for it handles gold, not as a currency reserve or a medium of banking, but as merchandise pure and simplej as humdrum in its nature as wool or pig-iron. Nevertheless, we in the Union are not without our "authorised dealers in precious metals," although little is heard of them. In addition to their better-known financial functions, our banks, in an entirely different capacity, are merchants whose stock-in-trade is gold and silver. Licenses for the business are too costly, and the qualifications demanded by the Department of Justice too stringent to allow many private competitors to carry on business in the Union. But there are purchases on speculation, sales on consignment, invoices, bills of lading 1 ,; adjustments of account, and every other feature of the Market Street warehouse whenever our banks see fit to act as bullion merchants.

In England the trade is immensely older, larger and wealthier than here. Although it has only come into the news since the abolition of the gold standard made a coined sovereign worth more than twenty shillings in other forms of currency, the business has existed in modern form since the eighteenth century. To-day thre are thirty-three firms in London which handle bullion as merchandise, and they are divided into three different classes. Only four of them are licensed as " dealers." Twenty-two are " brokers," and seven have the quaint name of " smelters," that is to say, have authority ' to smelt gold or silver. Owing to the risk that stolen valuables might be rendered unrecognisable by being put in the crucible, the Government, not only in England, but also in South Africa, jealously restricts the right to smelt gold to firms of the highest standing. The furnaces are liable to inspection at the Government's pleasure. Unauthorised use of an installation is a criminal offence. I

Firms engaged in this line require enormous amounts of capital. It is not surprising, perhaps, to find that the business is by no means deemed beneath the notice of the Rothschild interests. Apart from London, there are three bullion dealers in Birmingham, and one in Manchester, no other cities in the United Kingdom having enough business to support such establishments. For this type of trader, banks and manufacturers are the principal customers. Subject to the preservation of the legal minimum price, 77s 9d per ounce, the merchant is usually able to operate at considerable profit. When foreign exchanges hover round the so-called " bullion point," that is, the quotation at which it becomes more profitable to ship gold abroad than to draw bills, the offices concentrated naer Throgmorton Street seethe with activity. Orders are received by telephone, and " travellers " in this commodity make their rounds in the great financial houses day by day.

Over the counters of the dealers' offices, with their scales and grilles, the public brings its gold for conversion into current money. In normal times it may happen that the demand actually slackens, though, as before stated, the price can never sink below 77s 9d, for the Bank of England is by law obliged to buy for notes at that figure whatever gold is offerered to it.

Considered purely as a commodity, gold is of anything but uniform quality. The dealers handle it all the year round not only as bars but as ornaments and " dust." In the latter form it is largely imported from the rivers of West Africa, where washing operations still produce this precious sand. Only foreign coins may in the ordinary way to bought for the purpose of smelting. In March, 1918, the House of Commons enacted a law, under which it was forbidden to " accept or sell British gold coin above its face value." Now, however, the rule has gone by the wall. Turkey and India are two countries which have always been prominent among the customers of the London bullion brokers. In the East the socalled " Banyan " caste of Hindu has from ancient times specialised in the trade, and some of the Bombay and Calcutta merchants are immensely waelthy. While the recent English rush to exchange gold for sterling was spectacular it is worth recalling that it had its precedent here after the Great War, when South Africa passed through the famous " gold premium " period. Then, too, the bullion dealers handled masses of previously

hoarded coins and other valuables. The greatest thrill occurred on February ll y 1920, when the quotation per ounce passed 127 shillings, nearly twice the normal figure.' It is interesting to note that the principle that "wholesale quantities cost less " applies in the bullion trade as elsewhere. Small amounts, such as are bought by dental manufacturers and jewellers, fetch higher average figures than quantities purchased in bulk.

Impurities in the go'd also affect the size of the broker's offer. By means of an instrument resembling a screwdriver, small samples of the metal are wrenched out of each bar and sent for assay. According to the certified degree of fineness the price per ounce is fixed.