Monetary gold wikileaks - 1976BERN03745_b

1. SUMMARY: SWISS PRESS REACTION TO SECOND SHARP DROP IN GOLD PRICE SINCE JULY IMF AUCTION REFLECTS VIEW THAT GOLD PRICE FALL IS DIRECT RESULT US POLICIES. FORMER PRESS OPTIMIMISM ABOUT RELATIVE GOLD PRICE STABILITY OF PAST FEW WEEKS HAS GIVEN WAY TO APPREHENSION THAT CONTINUED FALL IN PRICE COULD UNDERMINE STRENGTH AND STABILITY WESTERN INDUSTRALIZED COUNTRIES. PRESS ARTICLES CONTEND THAT US WOULD THEN FACE AN URGENT FOREIGN POLICY ISSUE RATHER THAN ONE RELATED ONLY TO MONETARY POLICY. END SUMARY.

2. AGENCE ECONOMIQUE ET FINANCIARE (AGEFI) FRONT PAGE EDITORIAL STATED THAT GOLD PRICE UNDER ATTACK BY US AND FREG, TWO ECONOMIC GIANTS WHICH DESPITE THEIR OPEN HOSTILITY TO GOLD HAVE STRONGEST CURRENCIES. EDITORIAL GOES ON TO SAY THAT US POLICY AIMS AT MORE THAN PREVENTING SOVIETS FROM BUILDING UP LARGE FOREIGN EXCHANGE RESERVES THROUGH GOLD SALES AT APPRECIATED PRICES. AGEFI NOTED WORLD GOLD PRODUCTION DIMINISHED (FROM 1,267.5 TONS PRODUCED 1970 TO 927.8 TONS PRODUCED 1975). WHILE WORLD ECONOMY REQUIRES LARGER SUPPLY HARD CURRENCIES TO FINANCE ECONOMIC EXPANSION AND DEVELOPMENT. THEREFORE, GOLD SUPPLY NO LONGER ABLE PLAY CENTRAL MONETARY ROLE; INTERNATIONAL MONETARY SYSTEM MUST BE BASED ON CONFIDENCE DETERMINED BY ECONOMIC OUTPUT AND TRADE PERFORMANCE. 

 3. JOURNAL DE GENEVE AND AGEFI OPINED IMF ACTING AT US INSTIGATION TO SELL ITS GOLD, THEREBY DRIVING PRICE DOWN, ON PRETEXT USING GAINS TO PRIVIDE ASSISTANCE TO LDC'S. BOTH PAPERS POINTED TO RELATIVELY MODEST ASSISTANCE LDC'S COULD HOPE OBTAIN FROM IMF SALES AND CONCLUDED THIS ASPECT SALE UNIMPORTANT. JOURNAL NOTED THAT VALUE OF SOFT LOANS LDC'S COULD EXPECT RECEIVE FROM DC'S FAR EXCEEDED IMPORTANCE TO THEM OF IMF GOLD SALES.

 4. RE IMF SEPTEMBER 15 GOLD SALE, JOURNAL SAID THAT IMF WOULD WITHHOLD SOME OF TOTAL 780,000 OUNCES OFFERED IF PRICES BID WERE RIDICULOUSLY LOW. NEUE ZURCHER ZEITUNG QUOTED FRANKFURTER ALLGEMEINE ZEITUNG REPORT THAT ZURICH GOLDPOOL BANKS EXPECT GENERAL ABSENTION FROM BUYING AT NEXT IMF SALE. NZZ ALSO REPORTED CITICORP ANALYSIS FORECASTING POSSIBLE DROP IN GOLD TO DOLLARS 60 PER OUNCE OVER NEXT 12 MONTHS.

5. PAPERS AGREED THAT OUTLOOK BLURRED AND UNCERTAIN BECAUSE SALES PRIMARILY FROM PRIVATE HOLDERS AND TURNOVER NORMAL ON ZURICH MARKET. AGEFI NOTED THAT THERE ARE THOSE WHO WILL CONTINUE TO HOLD GOLD AS GUARD AGAINST FUTURE CATASTROPHIES, WHICH ONLY DETRACTS FROM GOLD'S VALUE AS NUMERAIRE. JOURNAL ASKED WHAT WOULD HAPPEN IF PRONOUNCED GOLD PRICE FALL TRIGGERED ECONOMIC CRISES, E.G., IN SOUTH AFRICA, FRANCE AND ITALY, AND QUESTIONED WHETHER US CONCERNED ABOUT SUCH CONTINGENCY. JOURNAL ANSWERED ITS OWN QUESTIONS BY NOTING HOPEFULLY THAT SOONER OR LATER US WILL REALIZE WHOSE OX IS BEING GORED, AT WHICH TIME DIMINISHED POWER OF WESTERN COUNTRIES WILL CEASE CONSTITUTE PURELY MONETARY ISSUE AND BECOME URGENT MATTER OF FOREIGN POLICY. JOURNAL CONTINUED THAT US IS BASICALLY PRAGMATIC AND WOULD NOT HESITATE CHANGE ITS POLICY WHEN ITS INTERESTS SO DICTATED, ADDING THAT CHANGE OF ADMINISTRATION COULD FACILITATE THIS CHANGE. DAVIS

Source: https://www.wikileaks.org/plusd/cables/1976BERN03745_b.html

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