53. Memorandum From Secretary of the Treasury Dillon to President Johnson1
SUBJECT
- Gold Transactions
The Treasury gold stock will show a decline of $250 million this week. This decline will be announced tomorrow afternoon at the weekly press conference of the Federal Reserve Bank of New York and will be reported in the press Friday morning.2
This decline will provide for sales of $232 million to France. $150 million is being sold this week, which will complete the French program of reducing their dollar balances of $300 million. In addition, there will be a sale next week of $82 million to cover the French balance of payments surplus in February. France has publicly stated that it intends to take enough gold each month to cover the preceding month’s surplus. Future French gold purchases will therefore depend on developments in the French balance of payments. Surpluses are not expected to continue at anywhere near the February level.
We have backgrounded the financial press thoroughly so that the drop in the gold stock should be attributed to France. The stories should also indicate that this transaction completes the French program of reducing the dollar balances, as announced by them in January.
Including this week’s transaction, the decline in the Treasury gold stock so far this year will amount to $825 million, nearly as large as the total loss in each of the years 1961 and 1962. During the coming quarter, the gold stock is expected to continue to decline but at a reduced rate. Even with full success in our balance of payments program we could easily lose up to $250 million during the second quarter. Thereafter losses, if any, should be much smaller. With success in our balance of payments program, it would not be surprising if the U.S. actually began to gain gold during the second half of the year. These projections are necessarily very tenuous and should not under any circumstances be used in public discussions.