The Wanganui Chronicle. MONDAY, DECEMBER 29, 1930. GOLD PRODUCTION AND PRICES.

Wanganui Chronicle, Volume 73, Issue 460, 29 December 1930, Page 6

The Wanganui Chronicle. MONDAY, DECEMBER 29, 1930. GOLD PRODUCTION AND PRICES.

"THE prospect o£ the future is a period of declining price levels because the supply of gold in the world will, in all probability grow less and less as tiie years go on. The decline in gold production has been the subject of two estimates the one by the Gold Delegation of the Finance Committee of the League of Nations and the other by Mr Joseph Kitehen a recognised authority on precious-metal statistics. The totals of the two estimates for the next decade is as lollows (in million dollars) :

The reason for this anticipated reduction in the world output of gold is to be found in the expected working out of the South African Rand mines. The League of Nations’ estimate of the output for South Africa for 1930 was 211.7 million dollars and this is expected to decline to 124.1 million dollars by 1940. During the same period Canada is expected to advance from 40.3 million dollars to 46.5 million dollars. Declines are expected in the output of the U.S.A., 42.8 to 36.1 ; Australia 11.2 to 10.2 and India 7.6 to 6.8. All other gold producing countries are expected to contract from 91 million dollars to 90 million dollars. It will be seen, therefore, that the crux of the gold situation as at present estimated is based on the assumption that the South African mines will decline to the extent expected. In the official Year Book of the South African Union (No. 11) which was issued in September, there is a new official estimate of the life of the gold-mining industry, which has been taken out during the last few months by the Government mining engineer. The estimate states that the lives of the mines would appear likely to be from 15 to 20 per cent, in excess of the "official” lives as estimated for income-tax purposes. The estimates are based on present costs, and it is considered that a fall of two shillings per ton in costs or a permanent sufficiency of labour would prevent any fall in production ior the next ten years. The estimate also assumes the inclusion of the produce of six new Rand mines between 1935 and 1940. Subject to the foregoing qualifications the South African outputs are forecasted as follows: —

It is to be borne in mind that a low price level stimulates gold production. When wages are ten shillings a day ore can be mined and the gold extracted at a profit which would be a losing proposition with wages at one pound a day. Low price levels, therefore tend to stimulate the cause for their own elevation. The economic see-saw is always at play. But there is this other factor to be considered. All factors are not sensitive lo movement from month to month and even from year to year. Wages generally tend to lag behind price movements by about nine months. Rents have a longer lag and debenture interest has a longer lag still. Debentures issued for periods of five or seven years frequently run throughout the whole of that time on a rising or a falling market with the same interest return. During the period of rising prices wages, rent, and interest, become a decreasing burden until a readjustment is made, whereas, during a period of falling prices the burden of wages, rent and interest is an increasing one until readjustment is effected. The lag in the period of increasing gold production extends up to five years which is about the time taken to get a modern big production gold mine into operation. Low price levels, therefore, have to prevail for quite a time beiore Iheir stimulating effect is made manifest on gold production.

Year. League of Nations.’ Estimate. Mr Kitchen Estimate. 1930 405 401 404 1931 ’’ ,, .. 407 410 1932 399 407 .1933 *.* *. -W 103 1934 398 1935 1936 .">56 397 1937 38 1 1938 O . I 370 1939 370 .1940

J 930 ]931 £ millions 43.8 4 ’ 3934 40.7 1935 39.11 J 936 34.25 3937 34.4 1938 .... 34.4 »» 27.4 1940 1941 .1942 20.1 1943 20.1 1944 1 ; >-5 1946 11.7 1947 . 10.1 .... lo.o 1949 10.0 »