The Commercial Demand For Gold In The Rest Of The World

Commercial demand for gold in the United States is important. It has a large impact on the total world commercial and overall non-monetary demand. Given the present free market price and our need to import gold, it has a substantial adverse effect upon our international payments position. But, according to most recent estimates, the United States demand is perhaps no more than 20% of the world as a whole. In 1971, United States consumption was estimated at 215.6 tons out of a total of 1,412.1 tons 1. This figure is very close to the 16% figure developed by Consolidated Gold Fields as the average for the years 1968-1970.2 Surveys of both production and use of gold on a world-wide basis are not new. With the bulk of gold production in only a few countries, it has been possible to develop fairly reliable series on gold output. Estimates have been developed on the known reserves of gold and probable output at various prices.3 On the demand side, figures have been somewhat less complete and reliable. The Bank for International Settlements and the Director of the United States Mint have regularly published estimates of commercial use in major industrial countries. The IMF has issued an increasingly comprehensive survey in its Annual Reports. The IMF has attempted to cover all nations-not restricting its efforts to major industrial nations-and has tried to estimate both gold taken for commercial uses (Estimated Industrial and Artistic Use) and for private hoarding. Their method is to begin with data on free world output plus any net sales by the Soviet Union, subtract any additions to world monetary stocks (or add to available supply for any net reductions in world monetary stocks), subtract estimates for commercial demand and have left as a residual an estimate for private hoarding. The method is straightforward and simple but the quality of the data is suspect. Industry sources tend to believe the figures as biased on the low side because of a persistent tendency to underreport gold movements.4