The gold market
Sir, Even if, according to Nicholas Davenport (April 14), the "irrepressible " Charles Stahl can claim the two-tier Old market instituted in March 1968 as " his brain child " — a claim, incidentally, which might not go unchallenged — 'his proposal to allow central banks to buy and sell gold at the free market price certainly ought to be challenged, and not only for the reasons given by Mr Davenport himself. If nothing else, it would endanger gold's continued role as an international monetary yardstick and reserve asset — whose value must, by definition, be fixed — far more than Mr Stahl's other proposal that gold Should be purchasable by American (and, if so, why not other?) citizens. Besides, even if the object was (as appears to be official American policy) to reduce that role, and ultimately to Phase gold out of the international monetary system altogether, it :would be better, in the interest of international monetary order as well as of the producers, to confine the right to buy and sell gold for monetary purposes, as at present, to the IMF. Indeed, if the accent was to be on selling (demonetisation!) rather than buying, the IMF should buy surplus gold from central banks and sell it at a uniform fixed price (which could be varied
Periodically) somewhere between the Official monetary and the ruling free market prices, with perhaps part, if not the whole, of any resulting profits being allocated (say, as extra Special Drawing Rights) to the developing countries. This would, in effect, replace the existing two-tier by a three-tier sys tem — Mr Stahl, please note! — and also strengthen, if there was any need to strengthen, the case for SDRs (or something like them) eventually occupying the centre of the international monetary stage. As Mr Davenport will know, not only has the Committee of Twenty on international monetary reform recently agreed that SDRs " should become the principal reserve asset of the reformed system," but the new value of the (jointly floating) Dmark has been fixed, for the first time, in SDRs only.
W. Grey 12 Arden Road, London N3
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