FINANCE AND INVESTMENT
GREAT things have been happening in the City but Thread- needle Street and not Throgmorton Street is playing the that really significant financial moves have been going on leading part. It has, in fact, been noticeable for some time in spite of the stagnation in the stock markets. Initiative is not completely inhibited and, of course, in some cases, has been stirred by the disturbing events which keep financial markets in check. One must certainly regard the huge gold transfer from the Bank of England to the Exchange Equalisation Account in this light. It cannot now be open to doubt that the pressure on the pound since Munich has been very severe. One can only guess at the extent of the gold losses, but they have probably exceeded D00,000,000, which implies that the Exchange Fund's gold resources had fallen well below L8o,000,000. In these circumstances the only surprising element in the transfer of £200,000,000 from the Bank to the Fund is the amount. At the current price the transfer is equivalent to £350,000,000, so that the Fund now has something over £400,000,000 of gold with which to defend the pound. In any " reasonably normal conditions "—I use the words in their 1939 context—this defensive equipment should be fully adequate, especially when sterling is being spared the strain of big financial deals involving purchases of foreign currencies and of unrestricted " bear " speculation. At the same time, the underlying causes of the weakness of the pound which are (x) the widespread preference for dollars in the light of European politics and (2) repatriation of French balances, still remain. Naturally enough, the first result of the mobilising of sterling's reserves has been to send the " bears " scurrying for cover, but the real trend is probably still in favour of New York. The value of the gold transfer is that it obviously places the Exchange Fund in a comfortable position and so should enable the pound to ride the waves without too much rocking. Gilt-edged have made the appropriate and polite response to the " Old Lady's " gesture by moving gently on to a slightly higher plane. * * * *
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