Gold Prices Fall $27 an Ounce in Heavy Selling
The price of gold plummeted Monday on broad-based selling spurred by the belief that the crisis in the Middle East may be easing. A free fall in oil prices also triggered selling in gold, analysts said.
“People loaded up over the weekend, figuring something would happen in the (Persian) Gulf,” said Martin McNeill of Sinclair Group.
When hostilities did not break out after Iraq’s deadline for foreigners to close embassies in Kuwait expired Friday, “they bailed out” of gold positions Monday, McNeill said.
On the New York Commodity Exchange, gold for delivery in December closed down a sharp $27 to $396.20 an ounce, below the psychologically important $400 level.
Analysts said the drop in oil prices, after a meteoric rise since the Aug. 2 Iraqi invasion of Kuwait, also prompted traders to sell gold they had bought as a hedge against inflation.
Gold traders weighed the chances of a peaceful solution to the Mideast crisis as United Nations Secretary General Javier Perez de Cuellar continued efforts to avert war in the Persian Gulf. He was expected to meet Iraqi Foreign Minister Tarik Aziz in the Jordanian capital of Amman on Thursday. Also pressuring gold were indications that the Federal Reserve may not ease interest rates, preferring to fight inflation rather than stimulate economic growth, said Tom Griffo of Cargill Investor Services. Higher interest rates are bearish for gold.
Silver on the New York Commodity Exchange fell on sympathetic selling, with the active September contract closing down 34.2 cents to $4.853 an ounce. On the New York Mercantile Exchange, the October platinum contract closed $21.30 lower at $486 an ounce.
