Chapter

Chapter 9. Gold

Author(s):
International Monetary Fund
Published Date:
September 1967
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Gold Production

A major feature of developments in gold markets during 1966 was the virtual leveling off in production of gold in the Western world. World output of gold increased only slightly, by 0.3 per cent. This excludes the production of Soviet countries and Mainland China, on which no reliable information is available. Total production was about 41.4 million ounces, worth (at $35 a fine ounce) approximately $1,445 million (Table 54). In general the trend noticeable in earlier years has continued. Output in South Africa continued to rise but at a slower rate; production outside South Africa continued to fall, although within this area production increased in the United States for the second year running. The world prospect is more than ever strongly influenced by the developments in South Africa.

Table 54.Gold: Value of World Production, 1940, 1945, and 1962-66 1(In millions of U.S. dollars at US$35 a fine ounce)
1940194519621963196419651966
South Africa4924288929611,0191,0691,081
Canada18695146139133126115
United States170325551515963
Australia57233836343132
Ghana31193132302724
Rhodesia29201920201918
Japan3031515161819
Philippines391513151516
Colombia22181411131110
Congo, Dem. Rep. of201278824
Mexico311788788
Other 2157696062605555
Total21,2647361,3001,3561,4061,4401,445
Source: International Monetary Fund, International Financial Statistics.

Excluding the output of Soviet countries and Mainland China.

These figures include estimates for data not available.

Source: International Monetary Fund, International Financial Statistics.

Excluding the output of Soviet countries and Mainland China.

These figures include estimates for data not available.

South African production reached nearly 30.9 million fine ounces in 1966, an increase of 1.3 per cent over the 1965 level of 30.5 million ounces and equivalent to approximately $1,080 million. South African output constituted rather more than 74 per cent of world production, as defined above, and this proportion has been increasing since the mid-1950’s when it was about 50 per cent. At the same time, South African gold production in 1966 was equivalent to 40 per cent of South Africa’s exports of merchandise plus gold production (i.e., including the whole of gold production as available for export); comparable ratios were 42 per cent in 1965 and 32 per cent in 1956. No other gold producing country shows an equivalent ratio above 10 per cent. In assessing future prospects for world gold production, these differences in the proportionate weight of gold mining in the national economies may be relevant, insofar as they make changes in the level of gold output a matter of national rather than of local or sectoral concern.

Excluding three mines classified as primary uranium producers, and two which ceased operations during the year, there were 47 gold mines operating as members of the Transvaal and Orange Free State Chamber of Mines at the end of 1966, and these mines accounted for 96 per cent of total South African gold production. The tonnage of ore milled by all members in 1966 was 2.2 per cent lower than in 1965, but the average grade of ore rose, from 7.518 dwt. in 1965 to 7.776 dwt. in 1966. Combined working profits from gold, uranium, and other products, which were on a strongly rising trend from the mid-1950’s to the mid-1960’s, are reported to have declined slightly, from R 332.2 million ($465.1 million) in 1965 to R 325.5 million ($455.7 million) in 1966. Five of the 47 mines, accounting for a little less than 2 per cent of South African gold production, operated at a loss in calendar year 1966. At the other end of the scale the 10 largest producers of gold and generally most profitable mines, which with one exception all commenced production after 1950, accounted for 67 per cent of the total profits of members of the Chamber of Mines. These mines together showed average working costs of only R 11.01 an ounce ($15.41 an ounce) on their aggregate production, accounting for roughly half the South African total. At these individual mines working costs per ounce ranged from R 7.2 ($10.08) to R 18 ($25.20). The 1966 profits of this group were, however, slightly higher than in 1965. Output for the group was up by nearly 2 per cent. The Western Deep Levels Mine, which is one of the newest mines, was the only mine in this group to reduce its working costs per ounce in 1966, while also increasing both its production and profits. Working costs per ton milled for the 10 mines as a whole increased in 1966 by rather more than 4.8 per cent.

During the second half of 1966 a series of small strikes may have hampered production and thus have contributed to the smaller increase in 1966 than in recent years. A recent agreement between management and labor has been reached on the basis of increases in productivity.

South African mining costs, measured by working costs per ton milled among members of the Chamber of Mines, rose by about 3 per cent a year from 1959 until 1964; in 1965 they increased by 5 per cent and they are estimated to have increased by nearly 4½ per cent in 1966. In addition, the South African Government, as part of its anti-inflationary measures, has added a surcharge of 5 per cent to the tax liabilities of the gold mines. Furthermore, the South African budget, presented in March 1967, included a proposal for an additional 5 per cent loan levy on the mines. On the other hand, tax relief is available to the gold mining industry, principally for new mines which are exempt until profits have covered initial capital costs of installation. Mergers of mines have also effectively reduced the incidence of taxation, particularly in relation to new development expenditures.

In the United States the value of production increased by about 5.2 per cent to the equivalent of $62.8 million in 1966, the highest since 1956. Increased official attention is now being given to stimulating gold production in the United States. The U.S. Administration has persistently opposed subsidy or assistance payments on the grounds that these could lead to uncertainty about the official gold price and thereby undermine confidence in the dollar. But this does not rule out official aid in resource development. In 1961 gold was added to the list of minerals eligible for the exploration loan program of the Geological Survey, and in the following five years 37 contracts relating to gold were made, totaling $2.2 million. Studies of the Geological Survey identified a new type of gold deposit which was developed by private exploration into the Carlin Mine in Nevada, the opening of which in 1965 was responsible for the recent upturn in U.S. gold output. In 1966, a more extensive Heavy Metals Program was launched jointly by the Geological Survey and the Bureau of Mines. Early results included identification of a gold-bearing zone in the Cortez area of Nevada, similar to that of the Carlin Mine.

The working basis of the official exploration and research effort is that discovery of new sources and development of new or improved mining and metallurgical techniques offer better promise of increased output than the reopening of known mines, though it is hoped that the lives of existing operations may be extended by improved technology. Attention is also being paid to marine exploration, which requires improved drill rigs; two different types are to be tested in the Bering Sea off Alaska.

The most significant reduction in gold production in 1966 was in Canada, where output fell by the equivalent of about $11 million. The Act under which financial assistance is granted to the Canadian gold mining industry is due to expire at the end of 1967. Of 41 mines which received assistance in 1965, 18 were paid the maximum permissible amount, which implies that production costs in these mines were at a level of Can$45 (US$41.63) a fine ounce. In 1965 approximately 67 per cent of the gold produced in Canada was eligible for some degree of financial assistance. This assistance is directed primarily to easing social problems, rather than to stimulating gold production as such, and is therefore limited to existing mining communities. The Mining Association of Canada, however, has urged continuance of this assistance on an extended basis to encourage the development of new gold producing areas.

As shown in Table 54, 1966 gold production increased by small amounts in Australia, the Democratic Republic of Congo, Japan, and the Philippines, remained constant in Mexico, but declined in Ghana and Colombia. In Nicaragua the UN Development Program is carrying out a geological and geophysical exploration program in collaboration with the Nicaraguan Geological Survey. As a result of this survey it is hoped that the recent fall in gold production can be reversed. Until 1950 gold constituted Nicaragua’s largest single export and it still accounts for more than half the total value of mining output. The UN Development Program is also carrying out projects in Bolivia, Ethiopia, Ivory Coast, Kenya, Senegal, the Sudan, Tanzania, and Upper Volta, with the object of increasing gold production.

There have again been reports of gold finds in the U.S.S.R. A major new gold field is reported to have been discovered at Muruntau in the Central Asian region. The report suggests that production could begin in the near future in this area and that it could be on a large scale. More than ten deposits of gold are also said to have been discovered in the Transbakalia region of Eastern Siberia. These deposits are located at shallow depth in the Karaton River valley.

Gold Holdings

During the 17 years 1949 to 1965, annual additions to official gold stocks ranged between $210 million and $825 million, averaging about $510 million. In calendar year 1966, however, there was a decline in the official gold stocks of national monetary authorities and international institutions of approximately $40 million (Table 55 and Chart 25). Total recorded official gold stocks amounted to $43.2 billion at the end of 1966. Changes in the distribution of gold reserves during 1966 are discussed in Chapters 2 and 7.

Table 55.Gold: Available New Supplies and Use, 1964-66(In millions of U.S. dollars)
196419651966
Production 11,4061,4401,445
Sales by U.S.S.R450550
Purchases by Mainland China−150−75
Total new supplies1,8561,8401,370
Total added to countries’ monetary
gold stock 16251,005−945
IMF gold transactions2−132−3117833
BIS and EF gold transactions2225−487121
Total added to world monetary gold
stock 1 (rounded)715210−40
Residual: consumption in industry and
arts, and private hoarding1,1401,6301,410
Sources: International Monetary Fund, International Financial Statistics, and staff estimates.

Excluding Soviet countries and Mainland China.

Minus sign denotes net outflow of gold from institution.

Excluding gold placed on general deposit in London and New York ($254 million).

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

Excluding Soviet countries and Mainland China.

Minus sign denotes net outflow of gold from institution.

Excluding gold placed on general deposit in London and New York ($254 million).

Gold holdings of the International Monetary Fund increased during calendar 1966 by a net $783 million. The total amount of gold received by the Fund in respect of subscriptions and increases in quota amounted to the equivalent of $1,165 million, of which $254 million was placed on general deposit with the Fund’s gold depositories in New York and London in accordance with the arrangements provided for in the report of the Executive Directors to the Board of Governors concerning increases in quotas of Fund members, Fourth Quinquennial Review dated February 26, 1965.1 Sales of gold to member countries amounting to $148 million were made under the same arrangements. Gold received by the Fund in respect of charges amounted to $24 million, which was offset in part by charges paid in gold by the Fund, amounting to $16 million in respect of borrowings by the Fund of members’ currencies under the General Arrangements to Borrow. Repurchases of members’ currencies from the Fund against gold amounted to $11 million.

Chart 25.Gold: Estimated New Supplies and Absorption, 1951-66

(In millions of U.S. dollars)

1 Including purchases by Mainland China amounting to the equivalent of $150 million in 1965 and of $75 million in 1966.

2 Excluding Soviet countries and Mainland China.

As gold production was not supplemented by Russian sales in 1966, newly available gold in the Western world amounted to approximately $1,445 million. Mainland China was again reported as a buyer of gold to the estimated value of about $75 million, compared with some $150 million in 1965. Absorption of gold by industry and the arts and by private hoarding appears to have been of the order of $1,410 million, $220 million less than in 1965 when total absorption for these purposes reached a peak. Since 1951 it is estimated that $13.5 billion of gold has been used by industry and the arts, or has gone into private hands. The motives behind the private acquisition of gold cannot be clearly disentangled, but they no doubt represent some hoarding in preference to other forms of savings, some speculation about an increase in the world price of gold, safeguards against currency devaluation, fear of war, and, more simply, response to the attractiveness of gold as an ornament.

Private Absorption

A breakdown of private uses between different categories cannot be made with much degree of reliability on the basis of the information presently available. Certain statistics are compiled by a number of countries on gold supplied by national mints and other central authorities for “industrial” use, i.e., for fabrication in the jewelry trade, for dental purposes, and for industrial consumption. In a number of cases, however, these “industrial” allocations may have been diverted in part to private holdings of nonfabricated or semi-fabricated gold. In addition, jewelry with a high gold content is held, mainly outside Europe and North America, as an important hedge against rising prices and falling currency values, as well as a repository for long-term savings; this apparent “industrial” use may in practice thus belong to a different type of private consumption of gold. Trends in nonmonetary uses of gold are of clear importance in assessing a number of key aspects of the international monetary system, and in the past year or so a widespread desire has been expressed for more accurate and comprehensive information. The Fund hopes to obtain improved information in this field.

One analysis of the forces and trends underlying private absorption of gold has been published by the Bank for International Settlements (BIS). For some time the BIS has been collecting statistics on the “industrial” use of gold, and it published them in 1966 as combined figures for 12 major countries. The BIS has stressed the hazards involved in such statistics and estimates because of the gaps in the statistics and because the motives behind private gold buying cannot be clearly separated in quantitative terms. A set of figures is also published by the U.S. Bureau of the Mint. The most recent set, for the calendar year 1965, comprises estimates for 36 countries derived from sources such as central banks, assay offices, ministries, and other official and semiofficial institutions.

In the absence of additional, more comprehensive, and more precise statistics, these two sets have been used in Table 56 in order to approach a breakdown of private absorption into two main categories, industrial and artistic use of gold and private gold hoarding. By using the Bureau of the Mint figures for countries that are not covered in the BIS survey, the range of countries covered, in which the amount of gold consumed by industry is estimated to be significant, can be considerably extended.

Table 56.Gold: New Supplies and Use, 1956–66(In millions of U.S. dollars)
Year(A)

Newly

Available

Gold 1
(B)

Additions to

World Monetary

Stock 2
(C)

Estimated Industrial

And Artistic Use 3
(D)

Estimated

Private

Hoarding 4
BISU.S. Bureau

of the Mint
19561,12549016580390
19571,27569019545345
19581,28568020065340
19591,38075022060350
19601,378310265110695
19611,54061528595545
19621,51535533060770
19631,90682532565690
19641,85671543090620
19651,840210465951,070
19661,370−40650 5760

New production plus Russian sales less purchases by Mainland China.

Data from International Monetary Fund, International Financial Statistics.

Based on series published by the BIS (Annual Report, 1966) for 12 countries and by the U.S. Bureau of the Mint for an additional 29 countries not covered by the BIS series.

The residual amount, columns A – (B + C) = D.

Fund staff estimate.

New production plus Russian sales less purchases by Mainland China.

Data from International Monetary Fund, International Financial Statistics.

Based on series published by the BIS (Annual Report, 1966) for 12 countries and by the U.S. Bureau of the Mint for an additional 29 countries not covered by the BIS series.

The residual amount, columns A – (B + C) = D.

Fund staff estimate.

In general, the increase in the consumption of gold for industrial and artistic purposes seems to have been roughly in line with the increase in private gold hoarding during the last decade. The estimated use of gold in industry and jewelry fabrication has expanded rapidly and has more than doubled in size over the period as a whole. Toward the end of the period, however, it seemed to grow at a somewhat faster rate than private hoarding which appears to have declined in 1966 from the very high level reached in 1965. In spite of the shortcomings of the statistics and the caution which is needed in their interpretation, they indicate remarkably strong upward changes in the trend of the “industrial” use of gold in 1960 and again in 1964, especially so in the Mint series but also in the BIS series. In 1960 consumption classified in this category expanded by about $95 million, and in 1964 by about $130 million, in contrast to an average addition over the preceding three years of approximately $12 million and $5 million, respectively. The first upturn in 1960 closely parallels a strong expansion in private hoarding of gold and this coincided with substantial demand for conversion of dollars into gold at the U.S. Treasury.

These two main features, the general parallelism in the expansion of private hoarding and “industrial” use of gold and the sudden expansion in certain years of the latter, are unlikely to have their roots in the use of gold for industrial purposes in the narrow sense of the term. As a rule, the major share within the category of “industrial” use is accounted for by gold used in the jewelry trade. Nor would changes in industrial stocks of gold explain these sudden spurts since the expansion was rather steady as a whole. In countries covered by the estimates, growth of real incomes during the period under review may have influenced the more steady expansion of the private use of gold. But this influence is probably of less importance in connection with the increased use of gold by industry than in the jewelry trade and other private acquisitions. Some of the sudden expansion of industrial use may have to be attributed to gold hoarding of the more speculative type. Without such an inference the behavior of the available figures on the private and artistic use of gold cannot be easily explained.

Statistics of nonmonetary absorption of gold are available for the United States. These show a strongly rising trend in recent years. Net issues of gold to domestic industry (i.e., after allowing for returns of scrap) exceeded $200 million in 1966. This absorbed about one seventh of the whole of world production outside the U.S.S.R., and was more than three times as large as U.S. production. U.S. industrial use of gold rose strongly from 1957 through 1966; but this trend followed an apparent sharp decline in the early 1950’s and a flat trend in the mid-1950’s. Thus, it was not until 1960 that net U.S. domestic absorption of gold regained its level of the late 1940’s. It may be coincidental that the period of slack industrial use of gold in the United States occurred in the years of relative unconcern about the world gold price. But at the least, this somewhat longer perspective suggests that, while industrial uses of gold may be expected to grow together with real income, and perhaps to increase notably faster than real income when income levels are high, it may be premature to project the most recent relationship into the immediate future. Even in the United States, where uses of gold in the computer and space industries are far more advanced than elsewhere, over three fifths of “industrial” use has recently been accounted for by jewelry manufacture and the arts.

In 1965 new gold absorbed by industry in the United States amounted to the equivalent of $185 million. Of this total, $120 million (65 per cent) was used in the manufacture of jewelry and the arts; $43 million (23 per cent) by industrial electronics, including space and defense; $13 million (7 per cent) by the dental profession; and $9 million (5 per cent) by other industry.

Demand for jewelry may be expected to increase over the long term with increased living standards in the high-income countries. This could, however, be countered by an opposite tendency in very low-income countries such as India, where gold hoarding is in part a facet of the lack of adequate alternative facilities for investment. More generally, the demand for gold for jewelry purposes is dependent on the availability and relative prices of competing materials such as diamonds, platinum, and silver; and also on changing tastes and fashions in the jewelry trade. These may be related somewhat distantly to speculation about the monetary price of gold.

In Germany, which is among the countries imposing no restrictions on private holdings of gold, commercial banks and gold dealers in the ten years ended in 1965 officially imported 600 tons, an average of the equivalent of $67 million a year. Imports were particularly heavy in 1965.

In Japan, the level of new gold production, which has remained roughly constant for the past two or three years, has not satisfied domestic industrial demand. In recent years, a substantial part of the gap between domestic production and industrial use has been bridged by the recovery of old gold and releases from official stocks. The remaining unsatisfied demand has induced smuggling and high premium prices. Accordingly, the Japanese authorities have announced that for the first time since the end of World War II they expect to buy some 10 tons ($11 million) of gold in the year ending in March 1968 to bridge the gap between domestic production and the requirements of industry.

Private demand for gold has continued at a high level elsewhere in Asia and in the Middle East, and has been heightened by insecurity and inflation. Laos has become an important center of gold operations in the Far East. Imports into Laos are subject to a duty which was increased gradually from 6 per cent in early 1966 to 8½ per cent in April 1967; gold imports totaled some $60 million in 1966. This gold is allegedly reexported in the form of “smugglers’ jewelry,” a crude form of jewelry manufactured with little craftsmanship, mainly to Thailand and Viet-Nam. Imports of gold into Macao are said to have been in the region of $40 million for the whole of 1965, almost double the amount imported a year earlier. These imports are subject to a levy which finances some 20 per cent of the territory’s budgetary expenditure.

Demand for gold coins has persisted at relatively high levels, and prices have risen steadily but modestly. Calculation of the percentage appreciation or depreciation in the value of sovereigns and napoleons based on their price in local currency over each year since the end of 1961 shows only a small appreciation for the sovereign over the period to the end of 1966, the largest increase in price being in the Beirut market with an average capital gain of 1.8 per cent per annum. The increase in the price of napoleons would have yielded an average of 4.6 per cent per annum in Beirut and an average of 3.5 per cent per annum in both Milan and Paris. These rates of average annual appreciation on this form of investment are of course smaller than the average yields on most income-earning investments.

Gold Movements, Markets, and Prices

New York

During 1966 official sales of gold by the U.S. Treasury to foreign countries totaled a net of $744 million (Table 57). In addition, the equivalent of $141 million was sold from the U.S. gold stock in 1966 to cover demand for industrial, professional, and artistic uses not met by new production and recovered gold. The $259 million paid by the United States into a suspense account of the International Monetary Fund in 1965 in anticipation of the increase in quota is attributed in Fund statistics to 1966, when the quota increase took effect, but it is shown in the U.S. statistics as an outflow of gold in 1965. Purchases of gold from foreign countries during the year under review included the equivalent of $200 million from Canada and $80 million from the United Kingdom. This figure may not reveal the exact movement of gold between the United Kingdom and the United States, since presumably it is adjusted in respect of operations in the London market by the gold pool2 in which the United States has a 50 per cent share. Altogether, U.K. official gold holdings declined by the equivalent of $325 million in the course of 1966. Sales of gold by the U.S. Treasury in 1966 included the equivalent of $601 million to France, all in the first three quarters of the calendar year. In addition, the United States sold gold to certain Fund members to enable them to pay the gold portion of their subscriptions to the Fund in respect of their increased quotas. These sales are not included in the amount of $744 million (net) mentioned above, as the Fund has placed an equivalent amount of gold on general deposit with the Federal Reserve Bank of New York. On April 30, 1967, the Fund’s general gold deposit with the Federal Reserve Bank of New York amounted to the equivalent of $230 million. Under a similar arrangement the Fund had placed the equivalent of $44 million on general deposit with the Bank of England.

Table 57.United States: Gold Transactions, 1964-66(In millions of U.S. dollars)
196419651966
Purchases from
Brazil54.225.2
Canada200.0
Italy200.0
United Kingdom617.7149.779.8
Other countries35.038.433.1
Total906.9213.3312.9
Sales to
Argentina21.5
Austria55.4100.0
Belgium40.182.7
France405.1884.2600.9
Germany225.0 1
Italy80.060.0
Netherlands60.035.0
Spain32.0180.0
Switzerland81.050.02.0
Turkey36.812.5
Other countries44.552.546.8
Industrial, professional, artistic89.0117.9140.6
Total1,032.11,619.1884.3
Transfer to International
Monetary Fund258.8 2
Total1,032.11,877.9884.3
Net decrease in stocks125.21,664.6571.4
Source: U.S. Treasury Department, Foreign Gold Transactions.

Two hundred million dollars of these sales formed part of the transaction initiated by the purchase from Italy shown.

Since the increase in Fund quotas did not take effect until calendar 1966, this figure is shown statistically, elsewhere in this Report, as being transferred from the U.S. Treasury to the Fund during calendar 1966.

Source: U.S. Treasury Department, Foreign Gold Transactions.

Two hundred million dollars of these sales formed part of the transaction initiated by the purchase from Italy shown.

Since the increase in Fund quotas did not take effect until calendar 1966, this figure is shown statistically, elsewhere in this Report, as being transferred from the U.S. Treasury to the Fund during calendar 1966.

The amount of gold held under earmark by Federal Reserve Banks for accounts of foreign governments, central banks, and international organizations increased in 1966 by the equivalent of $49.8 million to $12,945.8 million.

London

For most of the 12-month period May 1, 1966 to April 30, 1967, the price of gold in London was on the high side of the effective range for the market over the past several years, namely, $35.08 to $35.20 a fine ounce. During this period the price of gold quoted in U.S. dollar terms, converted from sterling at the buying price for U.S. dollars in London at the time of the daily fixing, fluctuated between a minimum of $35.10⅞ on May 3, 1966 and a maximum of $35.19¾ a fine ounce on December 23, 1966, the highest price at the fixing for five years (Chart 26). Over the same period one year earlier, the range was 10⅝ cents—between $35.08¾ and $35.19⅜ a fine ounce.

During the year under review, demand in the London market was particularly heavy toward the end of September, just prior to the Fund’s Annual Meeting, and deals were reported after the fixing on September 29 at prices up to $35.20 a fine ounce. In December buying increased sharply as a result of fears that the United Kingdom’s political difficulties with Rhodesia might lead to attempted sanctions on trade with South Africa. During January 1967, pressure for consideration of a rise in the international price of gold led to heavy demand, which subsided following a strong statement by the U.S. Treasury rejecting any such action. The price of gold and activity in the market declined as a result.

The demand for gold in the London market for 1966 as a whole has been described by the authorities in London as much lower than in 1965. Nevertheless, demand is said to have exceeded available supplies, and the central bank gold pool is reported to have been a net seller over the year, for the first time since its inception, as the Bank of England used the pool’s resources to meet excess demand to stabilize the price. Full evaluation of gold movements and the analysis of market behavior would require more details than are forthcoming as to the operations of the gold pool, such as the percentage participation of its members and the methods and timing of its settlement of surpluses and shortages.

Chart 26.Gold: Price in London Market, Monthly Averages, March 1954-June 1967

(In U.S. dollars a fine ounce)

Imports of gold into the United Kingdom were less in 1966 than in 1965, totaling the equivalent of approximately $931 million in 1966, compared with $1,378 million in 1965 (Table 58). The decline is accounted for principally by the reduction in imports from South Africa, from the equivalent of $1,210 million in 1965 to $834 million in 1966. The main explanation lies in the build-up of South African reserves during the second and third quarters of 1966 at a time of balance of payments surplus, whereas gold reserves had been allowed to decline in 1965 at a time of balance of payments difficulties and this led to increased shipments of gold to London. The absence of the U.S.S.R. as a seller of gold in 1966 was also a significant factor.

Paris

From May through December 1966 prices for the kilogram ingot in the Paris market increased steadily, to the equivalent of $35.44 a fine ounce at the end of the calendar year. On January 9 the price of the kilogram ingot reached a 5-year high in heavy trading at the equivalent of $35.61 a fine ounce; on the same date the napoleon reached its highest level for 15 years, equivalent to $54.56 a fine ounce. Activity declined on January 10 following the U.S. Treasury statement referred to above.

At the end of January 1967 the French authorities announced the withdrawal of restrictions on the import and export of gold, thus freeing the Paris market. This change, effective February 1, had no significant effect on the Paris market since, although there has been prohibition in principle of the importation of gold, residents of France have been able, under an Amnesty Law of 1958, to repatriate funds from abroad in the form of gold and to sell the gold on the Paris market. The market being adequately supplied with gold, the prices were roughly in line with those quoted in London and Zurich.

Developments in Other Markets

In other markets (Table 59) the U.S. dollar equivalent price for gold may be affected much more than in London and Paris by the fluctuations in the rate of exchange between the local currency and the U.S. dollar, as well as by the special circumstances of each market. Prices for both bar gold and gold coins over the period May 1, 1966 to April 30, 1967 followed a generally firmer trend, reflecting the high level of prices quoted in London. In Beirut the price for bar gold fluctuated within a range of 78 cents. The local banking crisis in mid-October caused the suspension of gold dealings from October 15 to October 21, 1966. Prices for the sovereign and napoleon rose steadily throughout the year.

Table 58.United Kingdom: Imports and Exports of Gold, 1962–66(In millions of U.S. dollars)
19621963196419651966
ImportsExportsImportsExportsImportsExportsImportsExportsImportsExports
Europe1.0817.71.1489.30.8389.32.62,163.639.4952.9
Austria30.319.018.630.436.4
France0.1135.00.498.694.12.31,512.831.8412.7
Germany79.724.70.448.90.281.469.0
Italy22.736.140.845.240.7
Switzerland0.2509.7275.5149.6425.46.6352.1
Other countries0.740.30.735.40.437.30.168.41.042.0
Africa717.823.0873.75.11,158.58.91,256.023.3860.24.1
Ghana30.633.629.425.723.9
South Africa664.7816.11,106.01,209.6834.1
Other countries22.523.024.05.723.18.920.723.32.24.1
Middle East132.9140.2162.36.0194.60.1215.9
Asia15.122.013.319.0112.70.147.7
North America350.60.242.00.51.210.54.2
South and Central
America1.217.01.111.31.833.21.052.40.829.8
Soviet countries and
Mainland China106.90.8282.44.5268.61.6112.6119.730.437.8
Other0.30.20.30.20.20.20.11.40.10.9
Total1,192.91,013.81,200.5664.51,429.8615.81,378.32,678.1931.21,293.3
Source: Annual Statement of the Trade of the United Kingdom.
Source: Annual Statement of the Trade of the United Kingdom.

The prices for bar gold in Hong Kong spanned a relatively wide range for that market, the low price being the equivalent of $40.19 at the end of July 1966 and the high point being $40.95 a fine ounce at the end of December 1966.

In Milan prices were extremely stable, moving within the narrow range of 12 cents; over the year as a whole prices for bar gold declined slightly.

In Greece the regulation of the free gold coin market introduced in December 1965 3 resulted in the dishoarding of some 10 million gold sovereigns in calendar 1966, which approximates the number sold by the authorities to the public in 1965. Dealings in gold coins have been banned since May 1967.

On June 6, 1966 the rupee was devalued and, while the price of gold in the Bombay market, in terms of rupees, immediately rose somewhat, the equivalent price in U.S. dollar terms declined from $89.58 a fine ounce on June 3 to $61.14 a fine ounce on June 10. The price remained fairly steady until early November when the amendments to the Gold Control Order4 were published. Since November, prices have not been available on a regular basis, but at the end of April 1967 the Bombay price reached Rs 156.5 per 10 grams, equivalent to $64.90 a fine ounce.

Table 59.Gold: Prices in Various World Markets, End of April, 1966 and 1967(In U.S. dollars a fine ounce, at day’s dollar rate)
Bar GoldSovereignNapoleon
End of

Apr. 1966
End of

Apr. 1967
End of

Apr. 1966
End of

Apr. 1967
End of

Apr. 1966
End of

Apr. 1967
Beirut35.2735.3642.0343.5648.1851.01
Bombay100.31 164.90
Brussels35.2235.4241.9342.4350.14
Hong Kong40.2840.23
Milan35.4535.4442.0142.6851.0552.75

This figure has been obtained by conversion from quotation for 14-carat gold; transactions were limited to gold of that purity.

This figure has been obtained by conversion from quotation for 14-carat gold; transactions were limited to gold of that purity.

Since private ownership of gold in India is the result of long-established custom, sales are uncommon unless the owner is subject to economic distress. Against this background it is unlikely that the devaluation of the Indian rupee on June 6, 1966 caused dishoarding of any sizable amounts of gold.

Changes in National Policies Affecting Gold

Bolivia. Toward the end of 1966 the Bolivian authorities authorized the Banco Central de Bolivia to purchase all gold and platinum produced in the country. The relevant decree permits the Central Bank to buy gold and platinum from national and foreign mining companies for U.S. dollars, based on the current quotations for the peso boliviano in New York. The decree also obliges cooperatives, societies, and individuals who mine gold and platinum to sell their output to the Central Bank. The purchase, exchange, and movement of gold and platinum are now illegal without the authorization of the Central Bank.

France. A decree implementing the law of December 28, 1966 on the reform of the exchange system and the liberalization of capital controls was published on January 29, 1967. French residents are now allowed to import or export gold freely or to hold the metal in France or abroad. The import or export is subject only to filing with the customs authorities a declaration previously visaed by the Bank of France.

India. On November 1, 1966 the Indian authorities amended the Gold Control Order.5 In order to discourage smuggling, the Government made it illegal for persons other than authorized dealers or refiners to hold gold in the form of bars, ingots, or slabs, following a transitional period of six months from March 1, 1967 wherein individuals were required to dispose of their primary gold holdings and of a further six months wherein dealers and goldsmiths were to convert such primary gold into ornaments.

Gold Subsidy Programs

The gold subsidy programs of Australia,6 Canada,7 Rhodesia,8 and South Africa 8 discussed in previous Annual Reports have continued in operation during the past year.

The Philippines 8 consulted the Fund regarding the amendment of the Gold Industry Assistance Act. The Act, as amended, provides for increased financial assistance to various categories of gold mines. The amount of the assistance is related to the production capacity of each category of mine and, where the mine is not producing gold as a by-product, to the differential between the costs of production and the official price. The Fund deemed these arrangements to be not inconsistent with the objectives of the Fund’s statement on gold subsidies dated December 11, 1947.9

Gold Transactions Service

Since the inauguration of the Fund’s Gold Transactions Service in March 1952, the central banks of 26 member countries and 5 international organizations have purchased or sold gold through the facilities provided by the Fund. In all, 121 transactions amounting to $1,093 million have taken place since March 1952. There was one small transaction in the fiscal year 1966/67.

1See Annual Report, 1965, pages 33-34.
2See Annual Report, 1964, pages 131-32.
3See Annual Report, 1966, pages 118-19.
4See Annual Report, 1964, page 108.
5Ibid.
6See Annual Report, 1960, page 144; 1963, page 181; 1965, page 103.
7See Annual Report, 1959, pages 149-50; 1961, pages 125-26; 1964, page 109.
8See Annual Report, 1964, page 109.
9Selected Decisions of the Executive Directors and Selected Documents (third issue, Washington, January 1965), pages 14-15.

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