A Treasury official revealed yesterday that increased speculative and investment demand for gold last year had doubled purchases of gold coins by American citizens to the equivalent of 3.5 million ounces and also expanded trading in gold futures.
But C. Fred Bergsten, assistant treasury secretary for international affairs warned that "for most Americans, investment in gold remains a highly risky proposition" because of the volatility of prices. highly risky proposition" because of the volatility of prices.
Since early 1975, when restrictions on ownership of gold by U.S. residents were lifted. Bergsten said, the range of losses and gains on investments made at three-month intervals runs from a loss of 58 percent to a gain of 451 percent.
Present American policy contemplates the sale of 1.5 million ounces of gold monthly, in part as a supplement to the dollar-support program announced Nov. 1, 1978. Gold sales, Bergsten said, help reduce the trade deficit (the U.S. had become a net importer of gold to the tune of $1.5 billion in 1977) and calm down speculation.
In accordance with a congressional directive, some of the gold sold next year will be in coin-like medallions containing one-half ounce or one ounce of gold. Bergsten said that if Congress appropriates funds for production and distribution, sales of 500,000 ounces worth of medallions could take place in the spring of 1980.
He noted that continuation of U.S. gold sales at the current level would make the U.S. the second largest supplier of gold to the world market this year. If other suppliers continue selling at recent levels, the total reaching the market would be about 70 million ounces, up 25 per cent over last year.
Bergsten reiterated the American commitment to gradual demonetization of gold -- a policy to which the U.S. gold sales program contributes, he said. He noted that other countries "have also virtually eliminated" any meaningful domestic monetary role for gold, and that the International Monetary Fund is in the process of disposing of one third of its gold holdings.
The Treasury official reported that not only have central banks been unwilling to acquire gold at market-related prices, but quoted IMF data showing that in addition to the U.S., other IMF members have disposed of about 15 million ounces of official gold holdings since 1971.
As for the suggestion by some that the proposed European Monetary System would result in a newly important role for gold, Bergsten said there is no reason to believe that the European arrangements "constitute any revival of a monetary role for gold." But he conceded that gold is an important asset that countries "will want to use even as it is being phased out of the system... Thus the arrangements are an attempt to reliquify (gold holdings) to at least a modest extent."