FINANCIAL MARKETS : METALS : Gold Dives to 4-Year Lows on Word of Saudi Selloff

Gold collapsed to four-year lows on talk that rich Arab syndicates were again selling a large chunk of their holdings.

In the second straight day of heavy selling pressure on New York’s Commodity Exchange, gold futures settled $5.20 to $6.10 lower. The contract for delivery in June closed at $346.80 an ounce, the lowest daily finish for a Comex gold contract since July 14, 1986.

In earlier trading in London, bullion was fixed at $345.85.

For the fourth time in three months, the gold market’s plunge was precipitated by large sales of bullion in London by Saudi interests, analysts said.

The $40-an-ounce drop in gold prices that began with the first bout of Saudi selling on March 26 has quashed investor interest in precious metals, said William O’Neill of Merrill Lynch Futures.

“Gold is a market that greatly deals in psychology,” he said. “The market psychology is so negative right now that it would take something of a very significant nature to change the scenario.”

O’Neill said the possibility of further heavy bullion sales by the Saudis or by gold-producing countries such as South Africa and the Soviet Union, which have also been large sellers lately, make a drop to $325 an ounce a not-unlikely prospect.