finds its way to that point where the greatest
urgency of demand exists. It may be Paris or Berlin, or it may be the
Bank of England. According as the representatives present at the
auction may bid, the disposition of the gold is determined.

The _primary_ disposition. For the fact that Berlin, for instance,
obtains the bulk of the gold auctioned off on any given Monday by no
means proves that the gold is going to remain for any length of time in
Berlin. For some reason, in that particular case, the representatives
of the German banks had been instructed to bid a price for the gold
which would bring it to Berlin, but the conditions furnishing the
motive for such a move may remain operative only a short time and the
need for the metal pass away with them. Quarterly settlements in Berlin
or the flotation of a Russian loan in Paris, for instance, might be
enough to make the German and French banks' representatives go in and
bid high enough to get the new gold, but with the passing of the
quarter's end or the successful launching of the loan would pass the
necessity for the gold, and its _re_-distribution would begin.

In other words, both the primary movement of gold from the mines and
the secondary movement from the distributive centers are merely
temporary and show little as to the final lodgment of the precious
metal. What really counts is exchange conditions; it is along the lines
of the favorable exchange that the great currents of gold will
inevitably flow.

For example, if a draft for pounds sterling drawn on London can be
bought here at a low rate of exchange, anything in London that the
American consumer may want to possess himself of can be bought cheaper
than when exchange on London is high. The price of a hat in London is,
say, L1. With exchange at 4.83 it will cost a buyer in New York only
$4.83 to buy that hat; if exchange were at 4.88, it would cost him
$4.88. Similarly with raw copper or raw gold or any other commodity.
Given a low rate of exchange on any point and it is possible for the
outside markets to buy cheaply at that point.

And a very little difference in the price of exchange makes a very
great difference so far as the price of gold is concerned. As stated in
a previous chapter, a new gold sovereign at any United States assay
office can be converted into $4.8665, so that if it cost nothing to
bring a new sovereign over here, no one holding a draft for a pound (a
sovereign is a gold pound) wo