48,375 oz. fine = 52,772.7 oz., 916!: fine.
52,772.7 oz. ® 77s. 10d £205,374 Deduct sundry expenses 4 Net receipts in London £205,370 Cost of sovereign (1,002,657.50 ± 205,370) $4.8822 Mint par in United States 4.8665 Cost of shipment per sovereign $ .0157 The reader will notice that no loss on account of interest is included in the foregoing. The new York banker who furnished the figures held that no such item was involved, for he sold sterling exchange as soon as he made a shipment, and so was never out of money in consequence. If we include interest for ten days at three per cent ($835.54), we raise the cost of the shipment to $.0197 per sovereign.
4. Gold shipments from New York to Ottawa.—At the beginning of the war, New York found itself with an unprecedented floating indebtedness to Europe, estimated at from $250,000,000 to $300.000.000.
Exchange became utterly demoralized. Cables on London rose to $5, to $6.50, and finally to $7 and re mittances became impossible. On August 14, 1914, in order to ease the New York exchange situation, the Bank of England signified its willingness to accept payments in London on New York account against the deposit of gold in Ottawa, thus eliminating the danger and expense of ocean shipments in time of war. From $100,000,000 to $150,000,000 were sent from New York to Ottawa under this arrangement and sterling exchange was thereby stabilized until the fall shipments of wheat, cotton, etc., produced their effect.
The deposits were accepted in Ottawa at the fixed price for gold bars of 77s. 6d. per ounce standard, and for eagles 76s. per ounce, equivalent to rates of $4.89 and $4.893, respectively per pound sterling.
Under normal conditions the Bank of England pays in London, 77s. 9d. per ounce for standard bar gold (or at the rate of $4.8744 per X) and buys eagles at about 76s. 41i d. per ounce (or at the rate of $4.8719 per X) , and so the difference between the Ottawa and London prices of 3d. or 4d. per ounce was most rea sonable, considering it would barely cover the cost of shipment to London under normal conditions. No particulars are available as to the dates on which the bold was returned to New York after ex change became favorable to the latter. The greater
part of the deposit, of course, was shipped on account of the Bank of England itself, tho some of it was re leased to London and New York bankers against pay ments made in London.
For instance, in the beginning of June, when cables were $4.78875, the Bank of England released eagles in Ottawa against a payment in London at the rate of 77s. per ounce, equivalent to the rate of $4.7985' and, at the end of June, with cables at $4.7725, stand ard gold bars were released at 79s. ld. per ounce, equivalent to the rate of At first glance the above transactions do not appear to be very profitable to the Bank of England as it paid 84.89 for standard gold in August, 1914, and sold it at $4.7922 in June, 1915, while eagles were sold at 84.7985 which cost $4.8930, but we must remember that these quotations are movable exchange (dollars and cents per pound) to London, consequently the Bank of England followed the old rule "buy high, sell low ;" and practically made a profit of ten cents per pound sterling.
To make this clear let us take the hypothetical case of a New York banker who transferred £10,000 to England via Ottawa in August, 1914, and transferred it back in June, 1915.
I-Tad the transfer been made by cable at 4.78% the banker would have received only $47,887.50, so the Bank of England saved him $97.50 on the transaction.
5. Shipments from actual returns of several shipments made to New York from Ottawa against payments in London during the summer of 1915 are of interest.
1. Purchase of eagles in London by arrangement with the Bank of England to release by cable the equivalent in Ottawa for shipment to New York: The Bank of England charged for the gold at the rate of $4.7985 per pound sterling, the net cost delivered in New York was $4.79487 per pound sterling, and the net amount realized by sale of a cable in London was $4.78875 per pound sterling, yielding a net profit of .00612 pre pound sterling. or $61.20 per £10,000. In other words, each dollar cost the purchaser 4s. 2.053d., which he resold at 4s. 2.117d. or a profit of about one sixteenth of a penny per dollar.