METALS : Gold Futures Prices Surge on Soviet Developments
Precious metal futures prices rose Wednesday on New York’s Commodity Exchange amid concern over the political climate in the Soviet Union.
Gold settled $8 to $8.40 higher, with the contract for delivery in February at $414.20 an ounce. Silver was 7 to 7.2 cents higher, with March at $5.368 a ounce.
The surge in gold prices began overnight with rumors that Soviet President Mikhail S. Gorbachev had resigned, said analyst Bette Raptopoulos of Prudential-Bache Securities Inc. The rumors proved false, but they stepped up demand for gold among Japanese and European buyers.
Analysts also attributed the rise to news that the Soviet Union was doubling the price of gold jewelry in a desperate effort to cool buying stemming from the political and economic uncertainties in Eastern Europe.
“Gold is going up because the Soviet government’s confirmation of concern about the offtake in gold could create even more demand,” said John Geraghty of Commodity Associates Inc.
Moscow said Tuesday that it was hiking jewelry prices by 50%. The move was intended to hold back the flood of buying of gold items by Soviet citizens worried about inflation and political unrest.
But analysts said speculators in the markets are betting that the Soviet demand for gold will rise as a result of the government action, and that buyers will go outside of the Soviet Union to satisfy their needs.
The sharp drop of the Tokyo Stock Exchange in recent days also spurred gold buying, as did a 15-point drop Wednesday in the Dow Jones industrial average.
A violent railroad strike in South Africa, a leading gold producer, also caused concern in the gold market.
A secondary factor was a surge in energy prices on New York’s Mercantile Exchange. Analysts say some investors view increased crude prices as an inflation barometer and the gold market as an inflation hedge.
Gold also rose in London to a late bid of $408.55 an ounce from $403.50 Tuesday. In Zurich, gold jumped to $409.25 an ounce from $403.50.
Earlier, in Hong Kong, gold closed up $1.82 at $404.08 an ounce.
Silver prices also strengthened. On New York’s Comex, silver bullion for current delivery settled at $5.306 an ounce, up 7.2 cents from Tuesday. Silver rose in London to $5.30 an ounce from $5.24.
