Victory in Defeat

For four years, the International Monetary Fund has tried to prevent its member nations from selling gold at more than the official price of $35 an ounce. But the fund, having no power other than moral suasion, has failed. For example, South Africa, the world's largest gold producer, has been permitted to sell some of its annual gold output for art and industrial uses at premium prices (current price: about $40). But everyone knows that much of the premium-priced gold (which now represents 40% of South Africa's output) is not used industrially, and finds its way into the hands of private hoarders.

Last week the fund stopped trying to police gold prices. Henceforth, it announced, the job will be up to individual nations. This means that there will probably be more premium sales (by Canada, Southern Rhodesia, etc.). Paradoxically, that will probably mean that the fund will come closer to realizing its goal. The more gold that goes into the free markets, the less the premium for it is likely to be.

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