Chapter 9 Gold and Silver

International Monetary Fund
Published Date:
September 1964
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Gold Production

WORLD production of gold, excluding the output of the U.S.S.R., Mainland China, and countries associated with them, increased in 1963 for the tenth consecutive year. The increase, of rather more than 4.6 per cent, brought the total to the largest annual figure ever reached, about 38.9 million ounces, worth (at $35 a fine ounce) approximately $1,360 million. This compares with $1,300 million in 1962, $1,215 million in 1961, and $1,178 million in 1960.

In the Republic of South Africa the gold mining industry again established new records in 1963, when production increased by more than 1.9 million ounces (about 7.5 per cent), to a total of 27.4 million ounces, equivalent in value to $961 million. This was the highest figure ever recorded for South Africa; it represented approximately 70.6 per cent of world production (Table 31).

Table 31.Gold: Value of World Production, 1940, 1945, and 1959–631(In millions of U.S. dollars at US$35 a fine ounce)
South Africa492428702748803892961
United States170325759555553
Southern Rhodesia29202020201920
Congo (Leopoldville)20121211877
Source: International Monetary Fund, International Financial Statistics.

Excluding the output of countries in the Sino-Soviet Area.

These figures include estimates for data not available.

Source: International Monetary Fund, International Financial Statistics.

Excluding the output of countries in the Sino-Soviet Area.

These figures include estimates for data not available.

Production also increased in Ghana, by the equivalent of $1.0 million, to $32.1 million. In Japan, Mexico, and Southern Rhodesia, production increased by smaller amounts, to totals equivalent to approximately $15.1 million, $8.3 million, and $19.8 million, respectively.

In Canada, which (if the U.S.S.R. is disregarded) is second only to South Africa as a gold producing country, output declined further, to 4.0 million ounces (US$139.0 million), from 4.2 million ounces (US$145.5 million) in 1962 and from 4.4 million ounces (US$155.5 million) in 1961. Peak output was achieved in Canada in 1941, when 5.4 million ounces (US$188.0 million) were mined. In the United States, the next largest producer, output declined in 1963 to approximately 1.5 million ounces ($53 million), after having remained constant at 1.6 million ounces ($55 million) in 1961 and 1962. For the United States the peak production year was 1940, when output reached 4.9 million ounces, equivalent to $170 million. Production also declined in Colombia, by the equivalent of $2.5 million, to $11.4 million; in Australia by $1.6 million, to $35.8 million; in India by $0.9 million, to $4.8 million; in Nicaragua by $0.7 million, to $7.1 million; and in Peru by $0.6 million, to $3.8 million. A fall in production in the Philippines, by the equivalent of $1.6 million, to $13.2 million, was due mainly to a strike lasting two months early in 1963 in the largest gold mine, and also to a shift in emphasis, by a major company, from gold to copper.

The number of tons of ore milled in South Africa in 1963 was about 3½ per cent higher than in 1962 and the average grade of ore per ton milled rose from 6.570 dwt. in 1962 to 6.861 dwt. in 1963. The combined working profits from gold, uranium, and other products rose from R 288.3 million ($403.6 million) in 1962 to a new record figure of R 313.0 million ($438.2 million); dividends paid by all producers of gold and uranium increased from R 104.7 million to R 117.0 million.

While gold production in South Africa has more than doubled over the past ten years and the profitability of the gold mining industry, as a whole, was greater in 1963 than ever before, the Transvaal and Orange Free State Chamber of Mines has indicated that in its judgment South African production will have nearly reached its peak in 1964 or 1965. Thereafter it may level off for a few years, and subsequently decline because of the closing down of the older and marginal mines, which cannot employ the new techniques used in conjunction with concentrated mining.

During the period under review, bad harvests forced the U.S.S.R. into the market as a buyer of wheat. These purchases, principally from Australia, Canada, France, the Federal Republic of Germany, and the United States, are understood to have led to the sale of gold in order to provide the foreign exchange to effect payment. For this reason Russian gold production, reserves, and sales have been a subject of considerable interest in the gold markets. It is estimated that in 1963 the U.S.S.R. sold gold approximating to $550 million, compared with sales of only $215 million in 1962. Recent estimates of Russian production have varied between $150 million and $400 million per annum and those of Russian gold reserves between $1,950 million and $7,000 million. In any event, it is felt that the drain on the gold reserves of the U.S.S.R. resulting from the wheat purchases will be significant, and there is some evidence of a desire by the Russian authorities to diversify their sales of gold. Banking facilities have been opened by them in Beirut. On the other hand, the Soviet authorities have announced a drive for increased gold output and a reduction in costs of production.

The gold mining industry as a whole shows increasing concern about declining production and increasing costs. The introduction of new mining techniques and discoveries of higher-grade ore have helped to maintain and even increase output in certain areas. However, a few governments have found it necessary to provide financial assistance to the industry, which in some cases has taken the form of direct subsidies. Reference is made to these below.

Gold Holdings

The stocks of gold held by the monetary authorities of the world are estimated to have increased in 1963 by about $855 million (Table 32 and Chart 24), which compares with increases of about $325 million in 1962, $600 million in 1961, $310 million in 1960, $750 million in 1959, and $225 million in 1951, in which year the smallest postwar increase was recorded. The holdings of the U.S.S.R., Mainland China, and the countries associated with them are not included in these figures, but those of the International Monetary Fund, the Bank for International Settlements, and the European Fund have been taken into account. At the end of 1963, world monetary gold reserves, thus defined, amounted to approximately $42.3 billion. The important movements in the distribution of reserves during the past year are discussed in Chapter 7.

Table 32.World Gold Reserves: Sources of Changes, 1961–63(In millions of U.S. dollars)
Soviet sales325215550
Total available1,5401,5151,910
Consumption in industry and arts, and private hoarding–940–1,190–1,055
Total added to world monetary gold stock 1600325855
IMF gold transactions
Sales to countries500
BIS and EPU/EF gold transactions–135165238
Total added to countries’ monetary gold stock 1,2830375975
Sources: International Monetary Fund, International Financial Statistics, and Fund staff estimates.

Excluding stocks held by countries in the Sino-Soviet Area.

Totals do not equal the sums of the items because of rounding.

Sources: International Monetary Fund, International Financial Statistics, and Fund staff estimates.

Excluding stocks held by countries in the Sino-Soviet Area.

Totals do not equal the sums of the items because of rounding.

Chart 24.Gold: Estimated Supply and Absorption, 1951–63

(In millions of U.S. dollars)

As Table 32 shows, the amount of gold newly available to the Western world in 1963 was of the order of $1,910 million. This suggests that the equivalent of some $1,055 million was absorbed by private holders, industries, and the arts in 1963—about $135 million less than in the previous year.

It has been estimated that over the postwar years approximately $15 billion of gold has been diverted from official holdings to other uses. This continuous drain has been ascribed to political and economic uncertainties. Current discussions of the problems associated with international liquidity emphasize the desirability of channeling gold as far as possible to monetary uses.

Gold Markets and Prices

New York

The Federal Reserve Bank of New York, as fiscal agent for the U.S. Treasury, stands ready to buy gold at a price of $34.9125 a fine ounce and to sell gold at $35.0875 a fine ounce for official monetary purposes.

In this capacity as fiscal agent, the Federal Reserve Bank of New York sold $391.7 million (net) of gold during 1963 to foreign countries and international institutions. In addition, the equivalent of $69 million was sold domestically for industrial, professional, and artistic uses. Thus, the total decrease in the U.S. gold stock during the calendar year 1963 amounted to some $461 million, compared with $889.9 million in 1962. In 1963, sales to foreign countries included the equivalent of $517.7 million to France, $130.0 million to Spain, and $82.1 million to Austria. Purchases of gold from foreign countries included the equivalent of $329.3 million from the United Kingdom (resulting mainly from the operations of the Gold Pool, discussed in a Supplementary Note, p. 131), $72.2 million from Brazil, and the equivalent of $24.7 million from the Philippines.

As a result of these and other operations in 1963, the amount of gold held under earmark by the Federal Reserve Banks for accounts of foreign central banks, governments, and international institutions rose by $253 million, to a total of $13.0 billion.


During the period May 1, 1963 to April 30, 1964, the dollar price of gold (converted at the buying price for dollars in London at the time of the daily fixing) fluctuated within the narrow range of about 55/16 cents between a maximum of $35.113/16 a fine ounce on August 30, 1963 and a minimum of $35.05⅞ a fine ounce on March 19, 1964 (Chart 25). In 1962 the corresponding range was 13½ cents, between $35.18⅝ and $35.05⅛ a fine ounce.

Chart 25.Gold: Price in London Market, Monthly Averages, March 1954–April 1964

(In U.S. dollars a fine ounce)

On May 1, 1963 the equivalent price at the “fixing” was $35.07⅜ a fine ounce, and until mid-July market fluctuations remained within a margin of approximately 1 cent on either side of this figure. However, toward the end of July, announcements by the U.S. Government of measures designed to rectify the U.S. balance of payments caused uneasiness about the strength of the U.S. dollar. This was reflected in some speculative buying of gold, which pushed the price up to $35.10⅜ a fine ounce by July 31. After some reaction from this price level, a recurrence of hoarding sent prices up to the peak for the year, $35.113/16 a fine ounce, on August 30. Early in September the first large-scale sales of gold by the U.S.S.R., somewhere in the region of $250 million, were made in Western Europe, mainly through Paris. The price immediately reacted, and despite reports of statements by the South African authorities to the effect that they might market their gold in other ways than through London, the price continued to ease, leveling off at about $35.0611/16 a fine ounce on September 27, 1963.

Thereafter, further sales of gold by the U.S.S.R. to cover its wheat purchases helped to reduce the price to its lowest level for the year, $35.06⅜ a fine ounce, on October 7, and throughout October the price fluctuated moderately. No real advance was noticeable until the end of the month, when large buying through Switzerland, reportedly to cover dealers’ end-of-month positions, pushed the price up to $35.10⅞ a fine ounce. The price eased again, however, in early November in quiet markets dominated by the sales and threat of sales by the U.S.S.R. The assassination of President Kennedy on November 22 led to substantial buying, the price rising to $35.095/16 a fine ounce on November 25, but the monetary authorities in New York, London, and Zurich maintained a firm control of the markets and confidence was quickly restored. On November 26, Wall Street regained all the losses incurred earlier and the Dow-Jones industrial index rose a record 32 points in a single day. Fortuitous assistance was afforded the authorities in controlling the gold markets at this time by the sale of some 25 tons of gold by the U.S.S.R. By the end of November the price had declined to about $35.07¾ a fine ounce.

For the next three months the markets continued steady and there were only minimal fluctuations in the price, despite the change of government in Zanzibar, the unrest in Burundi, Rwanda, and Tanganyika, and a resurgence of domestic troubles in Cyprus. Early in March, however, rumors of a devaluation of the Italian lira, together with anxiety in Greece caused by the King’s illness and the domestic political situation, caused demand to develop from both Milan and Athens. Nervousness associated with this buying caused a small increase in the London price, which reached $35.09⅞ a fine ounce on March 5. A resumption of selling by the U.S.S.R. depressed the price once again to $35.05⅞ a fine ounce on March 19, but the pre-Easter holiday demand resulting from the covering of short positions pushed the price up to $35.08⅛ on March 26. Intermittent sales of gold by the U.S.S.R. caused some fluctuations in the price during April, but at the end of the month it was slightly firmer at about $35.08⅜.

During the year, the sterling price of gold fluctuated between a minimum of 250s. 4½d. on July 9, 1963 and a maximum of 251s. recorded on February 25, 1964, the highest level reached in sterling terms since the Cuban crisis in October 1962. At the end of April 1964 gold was quoted in sterling terms at 250s. 7d.

During the calendar year 1963, the United Kingdom imported some 34.3 million ounces of gold bullion, equivalent to $1,200.5 million, compared with 34.1 million ounces ($1,192.9 million) in 1962 and 50.8 million ounces ($1,777.7 million) in 1961 (Table 33). Exports from the United Kingdom amounted to about 19 million ounces (the equivalent of $664.5 million), whereas in 1962 the total had been 29 million ounces ($1,013.8 million).

Table 33.United Kingdom: Imports and Exports of Gold, 1962–63(In millions of U.S. dollars)
Imports from
South Africa664.7816.1
United States336.042.0
Other countries85.361.2
Exports to
Bahrein, Kuwait, Qatar,
Trucial States66.376.2
Other countries220.4124.1
Net addition to gold stock in London179.1536.0

The figures in Table 33 are not indicative of the turnover of the metal in the London market, as they represent purely physical movements of gold during the year under review. The main supplier to the market was the Bank of England, as agent for South African production and for the Exchange Equalization Account. The importance of the operations of the Bank of England has been underlined by the working of the Gold Pool.

Other Developments

In markets where gold is bought and sold against local currencies (Table 34), the day-to-day movements of the U.S. dollar equivalent prices have always deviated from the London pattern because of the special characteristics of each market and the intermediary exchange rate fluctuations. Prices in local currencies in the period under review (May 1, 1963 to April 30, 1964) were relatively stable, although they continued to reflect political uncertainties and exchange pressures.

Table 34.Gold: Prices in Various World Markets, End of April 1963 and 1964(In U.S. dollars a fine ounce, at day’s dollar rate)
Bar GoldSovereignNapoleon
End of

Apr. 1963
End of

Apr. 1964
End of

Apr. 1963
End of

Apr. 1964
End of

Apr. 1963
End of

Apr. 1964
Bombay76.34 174.05 2
Hong Kong38.5538.09

Average for week ended May 10.

Average for week ended April 24. This figure was obtained by conversion from quotations for 14-carat gold; transactions are limited to gold of that purity.

Average for week ended May 10.

Average for week ended April 24. This figure was obtained by conversion from quotations for 14-carat gold; transactions are limited to gold of that purity.

The main movement in the U.S. dollar equivalent price for bar gold in these markets was in Bombay, where dealings were restricted following the introduction by the Government of India of a variety of regulations, noted below, the immediate objective of which was to reduce smuggling, but which were also expected, in the long run, to help the authorities to mobilize the existing private hoards of gold. The regulations have had the effect of reducing the demand for gold. There is some evidence that the volume of smuggling of gold has declined, and the price of gold, which had been rising steadily in recent years, was markedly lower in 1963 and the early part of 1964 than it had been just before the adoption of the gold control measures.

In the markets for gold coins, prices for the sovereign and the napoleon rose in general over the period, although at the end of April 1964 they were rather below the highest levels recorded during the year. In Milan this increase in price was due in part to increased political uncertainty and doubts as to the economic future, which early in March 1964 led to rumors of a devaluation of the lira. Early in April, stocks on the Milan exchange sank to their lowest point for four years, as selling revealed investors’ lack of confidence in the economic situation. This uncertainty led to an increased demand and higher prices for gold coins.

Gold Transactions Service

Since the inauguration of the Fund’s gold transactions service in March 1952, the central banks of 25 member countries and 5 international organizations have purchased or sold gold through the facilities provided by the Fund. In all, 119 transactions, amounting to about $1,083 million, have taken place since March 1952. The creation of the Gold Pool has had the effect of virtually eliminating the need for the service. Although there were two or three inquiries, no transactions were carried out during the fiscal year ended April 30, 1964.

Changes in National Policies Affecting Gold

In Chile, Congress enacted legislation to restrict dealings in gold to commercial and state banks. Regulations were adopted by the Central Bank’s Executive Committee which limited trading in gold bars and coins to the Central Bank. A further provision gave the Central Bank the power to determine the conditions under which the government mint would produce gold coins. Previously, the mint had been required to mint all gold offered to it, which had led to an inflow of gold against a corresponding outflow of currency.

All purchasers of gold coins from official sources in Greece are required to state their identity and addresses under regulations issued by the Bank of Greece at the end of January 1964. This measure was introduced to curb the large-scale speculative purchases and an unjustified increase in the price for the gold sovereign.

In January 1963, the Government of India promulgated Gold Control Rules under the Defense of India Act, requiring declaration of all private nonornament holdings of gold above certain minima, bringing all transactions in primary gold under government control, requiring that all ornaments made in future, whether from existing ornaments or from gold in other forms, have a purity not exceeding 14 carats, and prohibiting the manufacture of gold articles other than ornaments unless authorized by general or special order.1 Gold worth about Rs 230 million ($48 million) was declared to the authorities. In June 1963, the production of primary gold of more than 14 carats was prohibited and all existing stocks were required to be converted to that purity. In September 1963, self-employed goldsmiths were permitted to rework existing jewelry of more than 14 carats into jewelry of like purity; this was a measure of relief for independent goldsmiths deprived of work by the new policy. On November 26, 1963, the Finance Minister introduced a Gold Control Bill, which would give gold control greater weight and permanence by placing it on the statute books instead of its being administered under the Gold Control Rules as heretofore. The Bill would empower the authorities to call for declarations of ornament holdings in excess of prescribed ceilings; it is hoped that this would provide a disincentive to holding large amounts in this form. The Bill also requires all gold dealers to be registered, and not only those subject to sales tax. Special provision is made for religious institutions that receive gold as offerings and subsequently sell it.

In September 1963, the Republic of Liberia put into circulation its own gold coins. They have been minted by the Swiss Federal Mint and have a nominal value of $20, a gross weight of 18.65 grams, fineness of 900/1000, diameter of 27 millimeters.

The Uruguayan central bank has decided to sell its holdings of gold coins and buy gold in bar form. The value of the coins held is estimated at about $60 million, and the operation may take some years to complete.

Gold Subsidy Programs

The gold subsidy programs of the Governments of Australia,2 Canada,3 and the Philippines,4 discussed in previous Annual Reports, have continued in operation during the past year.

In April 1964, Canada consulted the Fund concerning the extension of its Emergency Gold Mining Assistance Act to the years 1964, 1965, 1966, and 1967. The new Canadian legislation contains provisions under which new lode gold mines commencing production after June 30, 1965 will be eligible for assistance only if the mine provides direct support to an existing gold mining community.

South Africa also consulted the Fund regarding the granting of assistance to certain marginal gold mines for one year through June 1964, mainly to meet the cost of pumping water from interconnected underground workings. In April 1964, the South African Government requested approval of this scheme for a further year, and also approval of further assistance for marginal gold mines, which unless assisted would be forced to abandon substantial tonnages of ore. This further assistance is to be made available in the form of unsecured loans granted by the State to cover working losses up to a maximum of 10 per cent of revenue, as well as for certain capital expenditure approved by the Government Mining Engineer, e.g., for shaft sinking, major development, and the purchase of items such as refrigeration or compressed air plants.

The United Kingdom consulted the Fund on behalf of Southern Rhodesia with regard to an Act approved by the Government of Southern [Rhodesia on December 30, 1963, which provides for the granting of financial assistance to potentially economic gold mines in Southern Rhodesia during the period September 1, 1963 to August 31, 1968. These mines are those from which gold is being or will be mined at a loss, but from which gold may, at some future time, be mined at a profit. The Minister of the Treasury has discretion both as to the eligibility of mines and the amount of any proposed financial assistance.

The Fund deemed the revised arrangements adopted by Canada and the new arrangements adopted by South Africa and Southern Rhodesia to be consistent with the objectives of the Fund’s statement of December 11, 1947 on gold subsidies.5


The wide interest in the price of silver and the activity of the last two years subsided after September 9, 1963, when the price of the metal rose to 129.3 cents, slightly above the price at which it becomes profitable to call upon the U.S. Treasury to redeem silver certificates.

In response to this increase in price, the U.S. authorities took action, and the Congress enacted a law repealing the Silver Purchase Acts of 1934, 1939, and 1946. The 1963 Act authorizes the Federal Reserve Banks to issue Federal Reserve notes in denominations of $1 and $2; this will enable Treasury silver certificates to be retired over a period of time. Following its enactment, purchases and sales of silver bullion in the United States were freed from legislative restriction for the first time for 30 years. The way was thus opened for trading in silver futures, which was resumed on the New York Commodity Exchange on June 12, 1963 for the first time since August 9, 1934. Under these new market conditions the highest price reached in 1963 was 131.35 cents an ounce on July 5, for delivery of silver in June 1964. The U.S. Treasury holds nearly 1,500 million ounces of silver, which will become available for coinage and other uses as Federal Reserve notes gradually replace silver certificates in the low denominations.

Annual Report, 1963, pages 179-80.

Annual Report, I960, page 144; Annual Report, 1963, page 181.

Annual Report, 1959, pages 149-50; Annual Report, 1961, pages 125-26.

Annual Report, 1962, page 164; Annual Report, 1963, page 181.

Annual Report, 1948, pages 79-80; Selected Decisions of the Executive Board (Washington, Second Issue, September 1963), pages 14-15.

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