Gold Rises to 5 Year High; Dollar Plunges in Europe

Gold soared to its highest levels in nearly five years and the U.S. dollar plunged to six-month lows against some currencies Monday as markets responded to falling stock exchanges and fears of a U.S.-West German fiscal war.

In Zurich, gold rose $21 an ounce to trade at $488.50 bid in the late afternoon, up from $467.50 on Friday and smartly up from the morning bid price Monday of $479.50.

Dealers said tension in the Persian Gulf and heavy losses on the Wall Street and London Stock Exchanges strengthened gold--a traditional refuge for investors in times of uncertainty.

“It’s the most active market we’ve seen for six months,” said one London dealer.

Gold opened in London at a bid price of $475.60 an ounce, compared to $466.00 late Thursday, the most recent quote due to the market having been closed Friday by a storm that hit London.

At mid-morning Monday, London’s five major bullion dealers fixed a recommended price of $479.50, and the afternoon fixing was delayed by an hour and a half before the dealers finally agreed on $481.00.

In both London and Zurich, the prices were the highest recorded since Feb.22, 1983, when gold fetched $488 in London and $497.75 in Zurich.

In Hong Kong earlier, gold gained $9.53 to close at $481.97.

The dollar lost a yen in Tokyo, nearly three pfennigs against the West German mark and more than two centimes against the French franc. It was two cents weaker against the British pound.

The dollar was steady after opening sharply lower--unlike gold, which rose throughout the day in Europe, or the London Stock Exchange, which opened with a stunning drop and continued to fall.

On the London Stock Exchange, the Financial Times Index of 100 leading shares at midmorning Monday was 2,164, down 137.9 points from last Thursday, and the 30-share index was down 101.5 points from Thursday to 1,711.4. Both were record drops, triggered by Wall Street’s 10-percent fall last week.

In New York, the Dow Jones industrial average was down by about 200 points at midmorning, then turned course as buyers stepped in.

By 2:30 p.m., the FT-SE 100-share index had plummeted to 2,020.2, down 281.7 points, or 12%, from its closing level Thursday.

Dealers said the main reason was a remark by U.S. Treasury Secretary James Baker that the United States would push the dollar lower unless West Germany relaxed its credit policy.