Political Turmoil in Russia Spurs Gold Prices : Market Overview
* Gold jumped to a 6 1/2-month high, driven by anxiety ahead of Russia’s vote determining the fate of President Boris N. Yeltsin.
* Stocks were broadly lower after the government issued a surprisingly weak report on durable goods orders. The Dow industrials fell for a fifth straight session.
* Long-term bond yields rose, spurred by gold’s gains and the potential for trouble in Russia.
Commodities
Gold futures for May delivery rocketed $6.50 to $346.50 an ounce on the New York Commodity Exchange, picking up from a rally that began overseas.
The gain was fueled by fears that Russia’s Yeltsin might lose in the nation’s referendum on Sunday--creating a political vacuum that could spawn social and economic chaos. That, in turn, would boost gold’s role as a safe haven.
Gold has gained $17.20, or 5.2%, since March 1, a performance that has persuaded many analysts that the metal’s long slump is ending. Even before the Russian worries, gold had been rising on fears of higher inflation.
Market stress over recent wild foreign currency swings also has driven more traders into gold as a store of value.
Meanwhile platinum also soared Friday, rising $7.30 to $377.20 an ounce on the New York Merc. Silver gained 4 cents to $3.95 an ounce on the Comex.
Oil also advanced. Light, sweet crude for June rose 19 cents to $20.34 a barrel on the Merc.
Stocks
Stocks began their decline at the opening bell after the government said new orders for durable goods plunged 3.7% in March.
The drop fanned new concerns that economic growth is waning, raising questions about future corporate earnings. The market also was spooked by the surge in gold ahead of Russia’s referendum.
The Dow industrials ended with a loss of 15.40 points to 3,413.77. For the week, the Dow lost 64.84.
Losers topped winners on Friday by a hefty 11 to 7 on the Big Board, though volume was moderate.
Analysts warned that the market continues to look vulnerable to a broader setback, as many of the leading stock groups of recent months fall out of bed.
Among Friday’s highlights:
* Bank stocks continued their steep decline of the past week, which some analysts said was the group’s worst setback in 2 1/2 years. NationsBank lost 1 3/8 to 49 1/8, Chemical Banking fell 1 1/4 to 37 7/8, BankAmerica dropped 1 3/8 to 47 1/8 and Wells Fargo tumbled 5 3/4 to 108 7/8.
* Industrial stocks falling on economy worries included IBM, down 3/4 to 47 3/4; 3M Co., off 1 5/8 to 113 1/8; and Alcoa, off 1 1/8 to 63 7/8.
But auto stocks were higher on encouraging April sales. Ford rose 7/8 to 52 7/8 and GM rose 1 7/8 to 40 1/2.
* Gold stocks rose with gold. Homestake surged 1 5/8 to 16, Newmont Gold shot up 2 1/2 to 41 1/2 and American Barrick added 1 to 20 1/2.
Overseas, European stocks fell despite the latest German interest rate cuts. Frankfurt’s DAX index dropped 9.64 points to 1,657.10 while London’s FTSE-100 index fell 37.3 points to 2,843.8.
But in Tokyo the Nikkei index rose 112.84 points to 19,704.15, stemming a five-day losing streak.
Other Markets
Bond yields fell early in the day on news of the durable goods report, but then spiked up as gold’s rally gained steam.
By the close the yield on the 30-year Treasury bond was 6.79%, up from 6.74% on Thursday.
Analysts said traders were beginning to focus on the possibility that gold is correctly foretelling higher inflation, which would be disastrous for bonds.
Meanwhile, in currency trading, the dollar capped off a dismal week with a feeble rally against the Japanese yen. The dollar closed at 110.50 yen in New York, up from 109.86 Thursday. But against the German mark the dollar slid to 1.583 from 1.597 Thursday.
