Sinking Dollar Fuels Gold; Dow Adds 14 : Market Overview
Gold soared as the dollar sank to new lows against the yen.
* Short-term interest rates jumped on renewed worries of a Fed move to tighten credit.
* Blue chip stocks ignored the dollar and gold, closing at a record.
Commodities/Dollar
Gold rallied to its highest level in nearly 2 1/2 years.
Gold for June delivery leaped $6.10 to $381.40 an ounce on New York’s Comex. Silver zoomed 13.7 cents to $4.70 an ounce.
Analysts said gold’s latest rally was fueled by the dollar’s woes. The currency sank to a postwar low of 107.20 Japanese yen in New York, compared to 108.50 Wednesday.
The dollar has been plummeting on widespread belief that the Clinton Administration prefers a strong yen to help pare the nation’s trade deficit with Japan. But the dollar’s free fall may be out of control.
Active dollar buying by the Federal Reserve failed to help Thursday. The buck also began to sink against other currencies, falling to 1.605 German marks from 1.628.
Because a weak dollar raises import prices, fears are growing that inflation will be higher than expected later this year and in 1994. That is what is driving so many investors to gold.
Credit
Short-term interest rates shot higher after a TV news report suggested the Federal Reserve could tighten credit faster than Wall Street expects.
The discount rate on one-year Treasury bills leaped to 3.44% from 3.32% on Wednesday.
The CNBC-TV network said the Fed would push up interest rates if the core rate of consumer inflation rises 0.4% or more in May. That report is due June 15.
How CNBC could know the Fed’s trigger is unclear. Fed officials, who met last week, are notoriously tight-lipped.
But the money markets have been on edge all week after it was widely reported that the Fed at least agreed to “lean” toward tighter credit at its meeting.
While short rates rose sharply, long-term yields edged only slightly higher. Bond owners would cheer any hard-line attempt by the Fed to counter inflation.
The yield on the 30-year T-bond was 6.92%, up from 6.91%.
Stocks
Stocks closed mixed, as bluechip issues ignored the dollar and gold markets while the broader market appeared to stall.
The Dow industrials added 14.67 points to a new high of 3,554.83 on Big Board volume of 300.81 million shares. But losers beat out winners by about 10 to 9 on the NYSE.
Analysts said the lack of broad participation by most stocks in the Dow rally was a bad sign.
Among the market highlights:
* Many industrial issues powered higher, as investors displayed continuing optimism about the economy’s outlook. Caterpillar jumped 2 3/8 to 72 3/4, GE rose 7/8 to 93 7/8, CBI Industries gained 1 1/8 to 24 3/8 and Kennametal added 7/8 to 38 3/4.
* Gold stocks renewed their rise. Newmont Mining rose 1 7/8 to 52 1/4, Placer Dome added 3/8 to 17 5/8, and Homestake leaped 1 1/2 to 19 1/4.
* Casino-related stocks continued their streak. Circus Circus shot up 1 5/8 to 59, Aztar surged 3/4 to 8 1/2 and Hilton was up 1 1/4 to 50 1/4.
* Fieldcrest Cannon leaped 2 3/4 to 26 3/8. It got a takeover offer of $27.50 a share from Springs Industries. Springs fell 1 1/2 to 47 1/4.
Overseas, Frankfurt’s DAX index rose 12.47 points to 1,634.47. London’s FTSE-100 added 8.4 points to 2,855.3. In Tokyo, the Nikkei average eased 43.36 points to 20,852.63.
Market Roundup, D6
