Alchemy in Prices

As far as price goes, gold is a schizophrenic commodity. For individuals, it is worth what the law of supply and demand dictates: at last week's end about $160 per oz. But as part of the international monetary system, its worth is fixed by fiat at precisely $42.22 per oz. In effect, nations that have gold reserves are stuck with a frozen asset in their vaults. Because they must exchange gold among themselves only at the low ''official" price, they have been unwilling to use bullion even as collateral in arranging international loans.

At an international monetary meeting last week, the finance ministers of ten leading financial powers solved the problem with an almost alchemic compromise--yet another price for gold. Henceforth, borrower and lender countries can negotiate a value between themselves for gold used as collateral in international loans. That value would be closer to the market price than the official price, probably somewhere between $100 and $120 per oz. today.

The agreement provides relief for economically depressed nations, like Italy, that happen to have large gold reserves. Many other financially beset countries, such as India, do not have large gold reserves. Thus, U.S. Treasury officials doubt that much gold will actually be used as collateral in the future.

U.S. policymakers want to remove gold from the world monetary system altogether. A start was made last week when monetary officials agreed to peg Special Drawing Rights (money created out of thin air by the International Monetary Fund) to the value of 16 world currencies rather than to gold. The move may transmute the yellow metal into a simple commodity for industrial users and speculators--whose numbers may soon include U.S. citizens.

Last week Treasury Secretary William E. Simon testified to Congress that he favors lifting the 40-year ban on ownership of bullion by U.S. citizens. Nixon already has legal authority to permit Americans to own gold, and Simon said that he hoped to recommend that the President do so "before the end of the year." The prospect may please citizens who find something reassuring about the clunk of bullion in their mattresses, but owning gold is hardly the inflation-proof investment of popular mythology. Indeed, U.S. speculators will discover that the market for gold is as erratic as those for silver, cotton and potatoes.

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