Bullion Battle

With gold speculation still feverish in the wake of the pound's devaluation, a high-ranking U.S. monetary official flew into Switzerland last week in defense of the dollar. After consultation in Basel with representatives of the international gold pool, Under Secretary of the Treasury for Monetary Affairs Frederick L. Deming emerged with the tantalizingly vague news that "we have agreed on an even closer coordination of our efforts."

Though details remained secret, what Deming was referring to was fresh moves by the pool's seven active members (the U.S., Britain, West Germany, Italy, Switzerland, Belgium and The Netherlands) to assure orderly trading on the London gold market, which handles 80% of the world's bullion dealings. The pool appeared most likely to: -- Ban gold trading on credit, a measure designed to dampen speculative buying by those who would rather not spend cash for outright purchases. >Forbid purchases on a future-delivery basis. Because of the U.S. pledge to maintain the price of gold at $35 an ounce, such transactions have meant virtually no risk for buyers, since there is a floor below which gold presumably will not drop.

> Require that gold dealings by nonmember central banks and private financial institutions be made directly on the market rather than through commercial banks. By ending the anonymity surrounding transactions arranged by Swiss banks, which customarily handle two-thirds of all orders going into the London market, this measure would enable the pool to identify--and cope with--abnormally heavy speculators. > Formalize the pool by giving it a formidable gold stock of its own for the first time. Until now each member nation has been billed monthly for gold that has been sold to meet speculative market demand. The new scheme might involve a "bankbook" arrangement under which members would deposit large amounts of gold with the pool--while continuing to count such gold in their own reserves.

For the moment, however, trading remained volatile. Ironically, one reason was market uncertainty over the precise measures that the Basel meeting had produced. On the Paris market, volume was so heavy that dealers ran out of gold ingots, had to delay delivery of one-kilogram bars for two weeks. In London, demand reached the highest levels since the week following Britain's devaluation. Nonetheless, dealers remained confident that any conceivable speculation could be met. For all their activity over the past month, private speculators have purchased an estimated $600 million worth of gold--a relatively small drain on the total $26 billion in bullion held by the U.S. and its gold-pool partners.

This file is automatically generated by a robot program, so reader's discretion is required.