ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Price of Gold

I S Gulati SINCE its establishment after World War II, the International Monetary Fund has all along sought to uphold gold as the basic exchange reserve The Fund was constantly concerned, from the very outset, that as much of newly mined gold as possible should go into monetary reserves This, according to the Fund's own review of its working over two decade ending with 1965, was one of the two principal reasons why it was averse to internationl, transactions in gold taking place at premium prices (ie, at prices above $35 an ounce). The other reason for the Fund's opposition to premium pricing of gold in in- ternational transactions was its fear that such transactions would undermine exchange stability.1 GOLD POOL Although the Fund deprecated premium pricing of gold in international transactions and made. this known to member countries, it did not intervene in the gold market on its own account, either to influence the price of gold or to channel gold to official reserves. (The Fund did organise in 1954 what was called Gold Transactions Services, which provided the member countries facilities for the sale and purchase of gold by their Central Banks and these facilities were availed of to some extent before the establishment of the Gold Pool in early 1961.) The US Treasury, on the other hand, was always prepared to buy gold from or sell gold to monetary authorities at the official price of $35 an ounce. Also the US Treasury kept a watch on the free market price of gold and intervened if the occasion arose. In I960, for instance, when the price of gold shot up to $ 10 an ounce in the London Market, the US authorities intervened by large- scale selling out of the US gold reserves.

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