Price of Gold Plummets $23.10 in Heavy Selloff : Commodities: Concerns about selling by Saudi Arabia, Japan and the Soviet Union sent the market into a trading panic.
Gold prices plunged Monday as a strong dollar and rumors of heavy selling by the Saudi Arabian Monetary Agency panicked the market.
Spot gold prices on the New York Commodities Exchange fell $23.10 an ounce Monday to close at $365.80--the lowest price in six months.
Industry experts said the selloff may have been spurred by the Saudi government, which is rumored to be liquidating 2 million ounces of the metal. However, some believe that the Japanese, who have been hard hit by plunging stock prices in the past two weeks, and the Soviets, who are attempting to bolster their economy, also may have been selling gold.
“There was heavy movement out of gold in the Middle East,” said George Anagnos, director of market research for the Commodities Exchange. “Rumors about the Saudis (liquidating gold) were widespread, but whether they were acting for themselves or as a conduit for someone else is not clear.”
The gold market, which had staged a brief but glorious rally between October and March, was susceptible to a heavy selloff, Anagnos added. The metal’s rise last year was largely due to inflation fears, a weak dollar and general worries about the economy. But those factors have changed.
“On a technical basis, the gold market has been hurt badly,” Anagnos said.
Gold prices tend to rise when the value of the dollar falls, and vice versa. And the dollar last week hit a one-year high against the yen.
Moreover, gold is considered an inflation hedge, so its price generally rises when inflation expectations are high. Since the Federal Reserve recently vowed to cut inflation by tightening monetary policy, gold was bound to be hit, Anagnos said.
The selloff began Monday in Hong Kong, where gold plunged $9.50 to $383.75 an ounce. Later, in London, the price plunged $18.45 to $368.50.
Stocks of gold mining companies also were hit. Newmont Gold tumbled $2.875 to $46.375; ASA Ltd. dropped $2.50 to $51.625; American Barrick slumped $2 to $17.50, and Homestake Mining lost $1.875 to $17.375.
Meanwhile, other rare metals fell too. Silver prices dropped 9 cents to $4.95 an ounce on the New York Comex, and platinum prices for April delivery fell $10.20 to $483.60 on the New York Mercantile Exchange.
Industry experts were not optimistic about a near-term rise in gold prices.
“I don’t think it will recover very quickly,” said Thomas F. Waite, director of wholesale marketing at Continental Cos., an investment fund that specializes in rare coins and bullion.
Edmond Serfaty, vice president and portfolio manager of US Gold Shares Fund, said there could be additional selling pressures over the next few days, primarily due to panic.
“Obviously this has blindsided a lot of people,” he added.
Serfaty, who had predicted that gold prices would reach $500 an ounce by year-end, said he was revising his estimates downward.
Still, several analysts believe that the metal’s prospects are reasonably bright over the longer term.
“We feel this is something of an aberration,” said Dan Stephenson, president of Conesco, a broker-dealer affiliated with Continental Cos. “Over the longer term, we are still rather bullish.”
GOLD PRICES
Daily close for near-term futures contract on the New York Commodoties Exchange
Monday close, N.Y. Comex: $365.80, down $23.10
