| 13,195-1/2 ounces bar gold (.9166 fine) purchased from U.S. Treasury or Sub-Treasury at $18.9459 per ounce | $250,000 | |
| Assay office charge (4 cents per $100) | 100 | |
| Cartage and packing | 20 | |
| Freight (5/32 per cent.) | 390 | |
| Insurance (1/20 per cent.) | 125 | |
| Interest on overdraft in London (from time draft has to be paid until the gold is credited) 3 days at 4 per cent. | 83 | |
| Total expense of buying and shipping the gold | $250,718 | |
| 13,195-1/2 ounces of gold credited in London at 77 shillings 10-1/2 pence | £51,380 | |
| Draft on London for £51,380, sold by shipper of the gold, at 487.96 | $250,718 |
In the transaction described above, the "overdraft" caused by the inevitable delay in assaying and weighing the gold on its arrival in London lasted for three days, the American banker being charged interest at the rate of four per cent. 487.96 being the rate at which the banker exporting the gold was able to sell his demand draft at the time, was, under those conditions, the "gold export point."
In this particular operation, which was undertaken purely for advertising purposes, the shipper of the gold came out exactly even. Suppose, however, that he had been able to sell his draft, against the gold shipped, at 4.88 instead of 4.87-3/4. That would have meant twenty-five points (one-quarter cent per pound) more, which, on £51,380, would have amounted to $128.25.
This question of the profit on gold exports is both interesting and, because it has a strong bearing at times on the question of whether or not to ship gold, important. No rule can be laid down as to what profit bankers expect to make on shipments. If, for instance, a banker owes £200,000 abroad himself and finds it cheaper to send gold than to buy a bill, the question of profit does not enter at all. Then, again, many and many an export transaction is induced by ulterior motives—it may be for the sake of advertising, or for stock market purposes, or because some correspondent abroad needs the gold and is willing to pay for it. Any one of these or many like reasons may explain the phenomenon, occasionally seen, of gold exports at a time when conditions plainly indicate that the exporter is shipping at a loss.
As a rule, however, when exchange is scarce and the demand so great that bankers who do not themselves owe money abroad see a chance to supply the demand for exchange by shipping gold and drawing drafts against it, the profit amounts to anywhere from $400 to $1,000 on each million dollars shipped—for less than the first amount named it is hardly worth while to go into the transaction at all; on the other hand, conditions have to be pretty much disordered to force exchange to a point where the larger amount named can be earned.
Import of Bars from London
Turning now to the discussion of the conditions under which gold is imported, it will appear from the following calculation that interest plays a much more important part in the case of gold imports than in the case of exports. With exports, as has been shown, the interest charge is merely on a three days' overdraft, but in the case of imports the banker who brings in the gold loses interest on it for the whole time it is in transit and for a day or two on each end, besides. A New York banker, carrying a large balance in London, for instance, orders his London correspondent to buy and ship him a certain amount of bar gold. This the London banker does, charging the cost of the metal, and all shipping charges, to the account of the New York banker. On the whole amount thus charged, therefore, the New York banker loses interest while the gold is afloat. Even after the gold arrives in New York, of course, the depleted balance abroad continues to draw less interest than formerly, but to make up for that the gold begins to earn interest as soon as it gets here.
The transaction given below is one which was made under the above conditions—the importer in New York had a good balance in London and ordered his London correspondent to buy and ship about $1,000,000 of gold, charging the cost and all expenses to his (the New York banker's) account. In this particular case the interest lost in London was at six per cent. and lasted for ten days.
| Cost in the London market of 52,782 ounces of gold (.9166 fine) at 77 shillings, 11-3/4 pence per ounce | £205,795 | |
| Freight (5/32 per cent.) | 320 | |
| Insurance | 102 | |
| Boxing and carting | 9 | |
| Commission for buying the gold | 26 | |
| Interest on cost of gold and on charges, while gold is in transit, 10 days at 6 per cent. | 343 | |
| £206,595 | ||
| Proceeds, at U.S. Sub-Treasury in New York, of the 52,782 ounces of gold at $18.9459 per ounce | $1,000,000 | |
| $1,000,000 invested in a cable on London at $484.04 | £206,595 |
In the above calculation it will be seen that the proceeds of the gold imported were exactly enough to buy a cable on London sufficiently large to cancel the original outlay for the gold and the expenses incurred in shipping it over here. On the whole transaction the banker importing the gold came out exactly even; a trifle over 4.84 was the "gold import point" at the time.