Volcker’s Concerns Send Dollar Down; Gold Gains

The dollar declined on most money markets Wednesday amid bearish sentiment about the U.S. economic expansion.

Gold prices generally edged higher. Republic National Bank in New York quoted gold as of 4 p.m. EST at $326 an ounce, up $2 from Tuesday’s late bid.

Currency analysts said the dollar came under pressure after Federal Reserve Board Chairman Paul A. Volcker voiced concern about the U.S. economy’s ability to keep growing.

During a financial conference Tuesday, Volcker said he was worried that softness in certain sectors, such as mining and manufacturing, could hamper the economy’s overall expansion.

“I think Volcker definitely sparked a reaction against the dollar,” a trader in Frankfurt said.

A London dealer said Volcker’s remarks “added to the general feeling that perhaps it’s time for the dollar to settle back to a more realistic level.”

The dollar came under additional pressure following a rumor that an Oklahoma bank was in financial difficulty. But Betty Johnson, an administrative officer for the state banking commission in Oklahoma, said there was no basis to the rumor.

The rumor made the market skittish because the failure of a government securities firm last month triggered a banking crisis in Ohio. And more recently another government securities firm in New Jersey filed for protection under federal bankruptcy laws.