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The whole turns upon the possibility of extending the market for gold. A child must see that, if the demand for gold cannot be materially increased, it is altogether nugatory that nature should indefinitely enlarge the supply. In articles that adapt themselves to a variable scale of uses, so as to be capable of substitution for others, according to the relations of price, it is often possible enough that, in the event of any change which may lower their price, the increased demand may go on without assignable limits. For instance, when iron rises immoderately in price, timber is substituted to an indefinite extent. But, on the other hand, where the application is severely circumscribed, no fall of price will avail to extend the demand. Certain herbs, for instance, or minerals, employed for medicinal purposes, and for those only, have their supply regulated by the demand of hospitals and of private medical practitioners. That demand being once exhausted, no cheapness whatever will extend the market. Suppose the European market for leeches to be saturated; every man, suppose, is supplied; in that case, even an extra thousand cannot be sold. The purpose which leeches answer has been met. And after that nobody will take them as a gift. But in the case of gold, it is imagined that, although the market is pretty stationary whilst the price is stationary, let that price materially lower itself, and immediately the substitutions of gold for other metals, or for other decorative materials (as ivory, etc.), would begin to extend; and commensurately with such extensions the regular gold market would widen. This is the prevailing conceit. Now let us consider it.

What are the known applications of gold in the old state of circumstances, which may be supposed capable of furnishing a basis for extension in the altered circumstances? I will rapidly review them. First, a very large amount of gold more than people would imagine is annually wasted in gilding. Much of what has been applied to other purposes is continually reverting to the market; but the gold used in gilding is absolutely lost. This already makes a drain upon the gold market; but will that drain be materially larger in the event of gold falling by 50 per cent.? Apparently not. Amongst ourselves the chief subjects of gilding are books, picture-frames, and some varieties of porcelain. But none of these would be bought more extensively in consequence of gold being cheap: a man does not buy a book, for instance, simply with a view to its being gilt; the gilding follows as a contingency depending upon a previous act not modified in any degree by the price of gold. In the decoration of houses it is true that hitherto our English expenditure of gilding has been very trifling compared with that of France and Italy, and to a great extent therefore would allow of an increased use. Cornices, for instance, in rooms, and sections of panels, are rarely gilt with us; and apart from any reference to the depreciation of gold, I believe that this particular application of it is sensibly increasing at present. Of course an improvement, which has already begun, would extend itself further under a reduced price of gold; yet still, as the class of houses so decorated is somewhat aristocratic, the effect could not be very important. On the Continent it is probable that at any rate gilding will be more extensively applied to out-of-doors decoration, as for example, of domes, cupolas, balustrades, etc. But all architectural innovations are slow in travelling! And I am of opinion that five to seven thousand pounds’ worth of gold would cover all the augmented expenditure of this class. It is doubtful, indeed, whether all the increase of gilding will do more than balance the total abolition of it on the panels of carriages. In the time of Louis XIV. an immense expenditure occurred in this way, and the disuse of it is owing to the superior chastity of taste amongst our English carriage-builders, who, in this particular art, have shot far ahead of continental Europe. But the main consumption of gold occurs, first, I should imagine, in watches and watch chains; secondly, in personal ornaments; and thirdly, in gold plate. Now we must remember, at starting, that what is called jewellers’ gold, even when manufactured by honourable tradesmen, avowedly contains a very much smaller proportion of the pure metal than our gold coinage. Consequently an increase in the use of watches and personal ornaments, or of such trinkets as snuff-boxes, supposing it in the first year of cheapened gold to go the length of 20 per cent., would not even in that department of the gold demand enhance it by one-fifth, but perhaps by one-fourth the part of one-fifth–that is to say, by one-twentieth. The reader, I hope, understands me, for upon that depends a pretty strong presumption of the small real change that would be worked in the effective demand for gold by a great apparent change in our chief demand for gold manufactures. There can be no doubt that in watches and personal ornaments is involved our main demand upon the gold market; through these it is that we chiefly act upon the market. Now three corrections are applicable to the prima facie view of this subject.