HL Deb 15 December 1969 vol 306 cc807-9
LORD BOOTHBY

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

[The Question was as follows:

To ask Her Majesty's Government whether it is the policy of the Treasury to allow the price of gold to fall below the level of 35 dollars an ounce, and thus to reduce the value of the liquid reserves of the Free World.]

LORD BESWICK

My Lords, within the international monetary system gold is, and will continue to be, bought at 35 dollars per fine ounce, and there is no question of a reduction in the value of reserves held in gold.

LORD BOOTHBY

My Lords, while thanking the noble Lord for his encouraging Answer, may I ask him two supplementary questions? First, in view of the fact that as a measuring rod the value of gold is superior to that of any currency, including the dollar, and also that well over half the monetary reserves of the world are held in the form of gold, would not a fall in the free price below 35 dollars be highly undesirable? Secondly, will Her Majesty's Government use their influence to help to bring about an agreement, which now seems to be possible, between the United States, the International Monetary Fund and the South African Government for the purchase by central banks of monetary gold in order to avoid an illiquidity which might be disastrous for world production and trade?

LORD BESWICK

My Lords, the noble Lord has couched two questions in a somewhat provocative form. Had they been less provocative I could have given him a more friendly answer.

LORD BOOTHBY

Give me a friendly answer.

LORD BESWICK

In the first place, I would not accept that gold is superior to other forms of currency. Experience is showing that gold is inferior to the S.D.R.'s now being introduced into the monetary system. The fact is that the two-tier system has worked very well since March, 1968, and I cannot myself see that confidence in it can be reduced. As to the second question which the noble Lord asked, it is well known that discussions are taking place between the United States and the South African authorities. It is also known that in October, 1968, a proposal was put to the South Africans who then turned it down, no doubt because they then shared the noble Lord's misplaced optimism about the importance of gold. But there have been these discussions; Her Majesty's Government have exchanged opinions with the United States authorities, and we hope that some agreement may be reached.

LORD BYERS

My Lords, may we take it that the Bank of England would not be prepared to buy gold if it fell below 35 dollars?

LORD BESWICK

My Lords, the noble Lord is absolutely right For the Bank of England to buy gold under 35 dollars would, in our view, be contrary to the Washington Agreement.

LORD CONESFORD

My Lords, what is "illiquidity"? Is it what used to be called "solidity"?

LORD BOOTHBY

My Lords, I cannot answer the noble Lord—I should have liked to do so. May I ask the noble Lord, Lord Beswick, whether it is not a fact that every country in the world, without exception, prefers gold as a final medium of reserve to any other commodity, including S.D.R.s?

LORD BESWICK

My Lords, on the question of illiquidity, whatever is the precise definition, it is not nearly so great a menace as the noble Lord, Lord Boothby, is trying to make out. In fact, we are getting along very nicely in international trade. As to the further supplementary the noble Lord put to me, the truth is that the free market price of gold has not borne out the glowing praise which the noble Lord gave when we had our interesting discussion a few months ago.

LORD HAWKE

My Lords, will Her Majesty's Government bear in mind that any fall below 35 dollars an ounce would be absolutely disastrous to the peasantry of the East. who for many years have stored up their savings in gold as security?

LORD BESWICK

My Lords, I think the fact of the matter is that a good deal of the "old black magic" surrounding gold has gone. I hope it has gone for good.