Business: Gold

In 1930 the League of Nations issued a sensational financial report predicting a rapid decline in world gold production. As all the world knows, precisely the reverse has occurred. For 1935 the League forecast world output of less than 19,000,000 oz. Last week the Wall Street Journal declared that more gold was mined in July than in any previous month in history, estimated that production for the full year would top 29,000,000 oz.—a record.

Since the League’s bearish report five years ago two unpredictable factors have completely altered the gold picture. First was the sudden rise of Russia from a minor position to second place among the world’s gold producers. In the first seven months of this year South Africa led the list; as it has for years, with an output of 6,195,000 oz. Russian production was 2,450,000 oz., U. S. 1,891,000 oz., Canada 1,796,000 oz.

Second and more important factor in confounding the League prediction was currency depreciation, which enormously stimulated both mining and prospecting. At $35 per oz. U. S. gold mining is a far more attractive business than at the Hoover price of $20.67. There have been no great new strikes but higher prices have permitted the working of low-grade ores previously unprofitable to mine and mill. And every gold region on earth has had a mining boom.

Currency depreciation also uncovered another vast source of gold—India. Since the autumn of 1931, when Britain quit the gold standard, India has exported no less than 29,300,000 oz.—more than the rest of the world has mined in any single year to date. But Indian gold was not mined; it was disgorged from fabulous private hoards. When pound sterling was hitched to gold, the metal was worth about 85 shillings per oz. Indian princes and potentates today receive 140 shillings.

All India’s gold, along with no inconsiderable portion of the recent output of newly-mined metal, went into hoarding in the Western World. It is estimated that nearly $3,000,000,000 in coin and bullion is now hidden in countries other than India, China and Egypt, the three traditional sinkholes of precious metals. If world gold production had not increased, much of that hoarded gold would have been drained directly from monetary stocks, vastly aggravating the deflationary course of the Depression. Yet the world’s monetary gold stock today is near its all-time high of $22,000,000,000, more than one-third of which is held in the U. S.*

*All the world’s monetary gold could be stored in a room 51 ft. long, 35 ft. wide, 20 ft. high.