Evening star., 1924-08-10
TURN IN GOLD TIDE
IS GREATLY NEEDED
Advance in Sterling May
Help Reduce Enormous Sup
ply of Metal Now in U. S.
GERMAN LOAN NEARER
Revival of Speculation in Berlin
Marks Proves Puzzle to
Wall Street.
BY GEORGE II. HUGHES.

Special Dispatch to The Star
NEW YORK, August 9.-In a week
replete with interesting incidents
from an investment standpoint there
was nothing more significant than the
advance in sterling exchange TO
new high record for the year. Pri
marily, this upturn represented spec
ulative buying based on the favorable
outcome of the allied conference in
London. The Importance to our own
financial position, however, goes
great deal further.
For some time now there has beer
a steady Withdrawal of funds from
the New York market seeking more
profitable employment abroad and IT
is this phase of the matter which de
mands the closest attention AS is
well known, our banking system is in
the strongest position in it's history,
holding as it does more than half the
worlds supply of gold. 1t Is upon this
excess of the yellow metal that the
present extraordinary ease in money
rates is founded and this ease in
money in turn is responsible in large
degree for the strength of invest
ment securities.
Turn in Gold Tide Needed.
The question now arises whether
the advance in sterling and the coin
cident shifting of balances viii go
far enough to make an impression
upon our gold supply. In the nature
of the case, no exact answer can be
given. Economists agree that turn
in the tide of gold which is still COM
ing in would be altogether salutary,
but if the immediate result IS a
Tightening of money rates 1T would
remove the chief prop from the in
vestment market and make the fu-
ture entirely dependent upon the
trade situation. There is some reason
to believe that the directors of the
New York Federal Reserve Bank were
Influenced in their decision on Thurs
day to cut the rediScount rate from
3I2 to per cent by desire to help
along the restoration of sterling eX-
change to parity.
The exchange market, however, has
still to reckon with normal trade
movements which at this season in
yolve heavy demands for dollars BY
British importers of American raw
materials. The British also are un-
der the necessity of accommodating dol
lars for payment of interest upon the
war debt to the United States. Both
these influences would ordinarily
cause a reaction in sterling. How far
these causes will be overbalanced by
the greater relative attractiveneSS of
money rates in London and by the
purchase of foreign securities by
American investors remains to he
course of sterling exchange during
the next 80 days will be so closely
watched by those interested in fore
casting the future of the American in
vestment market
Foreign Outlook Brighter.
AS far as the action of the New York
Federal Reserve Bank directors goes,
the only surprise was that the cut in
the rate came when it did. Action of
this kind had been expected more or
less confidently for nearly a month.
AS matter of fact, it does not change
the money situation at all. 1t is
simply official recognition of a con-
dition which everybody knew existed
1t had no particular stimulus upon the
bond market except TO bring about re-
covery of Liberties to around the best
prices of the year.
Along with the rises in the exchanges
the week has witnessed remarkable
revival of confidence in foreign in
vestments On the Stock Exchange
French bonds made the highest prices
seen this year and in some instances
have sold at the highest quotation for
all time. Dealings were on a very
large scale representing both specula-
tive and investment buying. Other
European bonds than the French were
favorably affected Conspicuous among
these was the new Hungarian loan
which sold we'll above the offering
price.
The successful placing of this loan
in itself is testimony to the reversal
of sentiment in this country toward
foreign securities. Unlike the Austrian
loan of a year ago. there was no guar
antee by other powers of the Hun
garian Offering. Nevertheless the
bonds were sold and the market proved
better disposed toward them than was
the case in London which is condi
tion almost without precedent. All
this has encouraged the bankers who
expect to be called upon to sell d
German loan to American investors.
German LOan Expected Soon.
The German loan is expected now by
the 1St of September if not before.
No definite information is available a.
to the terms. The coupon rate will
be at least Z per cent and may he
more and the offering price. it is an
ticipated, will be such as to yield
around per cent. Much will depend
upon conditions prevailing a the time
the bonds are actually offered. II
would seem that German loan must
be made as attractive as the outstand-
ing bonds of Austria or Hungary.
inserting provision for redemption at
a premium by annual drawings, there
by giving speculative feature.
One feature of the foreign bond
market for which no adequate explana-
tion is at hand is the revival of Specu-
lation in German government mark
securities. The buying orders are said
to have come from abroad. Certainly
the Dawes plan makes no provision
for these bonds. If the German gov
ernment is to recompense the unfor-