Gold Futures Fall to 12 1/2-Year Low; Stocks Rally
Gold futures plunged Friday to a 12 1/2-year low amid persistent concern that central banks will lend more gold, increasing supply at a time of slack demand.
But U.S. stocks posted their best showing in nearly two weeks on encouraging signs about inflation. Oil prices rose on escalating tensions in the Middle East.
Meanwhile, as Asian markets continued to roil, the Clinton administration dispatched its point man to consult with finance officials in Europe and Asia.
Deputy Treasury Secretary Lawrence Summers will meet with European monetary authorities in Frankfurt today and officials of the Japanese government in Tokyo on Monday.
A senior Treasury official said the financial troubles abroad will be a central agenda item when President Clinton and the leaders of Japan, China and the other countries in the 18-nation Asia-Pacific Economic Cooperation forum meet in Vancouver on Nov. 24-25.
The drop in gold prices followed confirmation from Germany’s Bundesbank that it has been lending some of its 3,700 metric tons of gold reserves and reports that Switzerland may sell almost a third of its reserves. In July, the Reserve Bank of Australia said it sold more than two-thirds of its gold reserves.
“Gold is a washout,” said Jeffrey Ralph, a trader at Royal Bank in Toronto. “The drop hasn’t been long in coming because of the Bundesbank news on top of the Swiss sale plan.”
Gold for December delivery fell $4.50 an ounce to $303.70 an ounce on the Comex division of the New York Mercantile Exchange, the lowest since March 18, 1985. Prices fell as low as $300 an ounce during trading, in the biggest one-day drop since Switzerland announced its sales plan Oct. 31.
On Wall Street, the Dow Jones industrial average climbed 84.72 points to close at 7,572.48 after government reports showed inflation at the wholesale level nearly disappeared in October and retail sales slumped, suggesting that demand may be easing enough to help contain inflation.
Broad-market indicators also rallied, led by the Nasdaq composite index, whose bellwether technology shares extended Thursday’s rebound from a five-session losing streak. Nasdaq rose 24.26 points to close at 1,583.51.
Treasury bonds were mixed. The 30-year T-bond was little changed, with its yield edging up slightly to 6.10% from Thursday’s 6.09%.
The advance was particularly encouraging, analysts said, because it came before a weekend full of question marks about the latest U.S.-Iraqi standoff and the unfolding financial crises around the world.
Advancing issues outnumbered decliners by a 2-1 margin on the New York Stock Exchange in heavy trading. The Standard & Poor’s 500-stock list rose 11.69 points to close at 928.35, and the NYSE composite index rose 5.37 points to close at 486.06.
Smaller-company shares shook off their recent lethargy. The Russell 2,000 index of smaller companies rose 5.02 points to close at 428.41.
Among Friday’s highlights:
* For the second day in a row, the Dow’s biggest gainers were widely held names such as IBM, up $2.38 to $101.50; Disney, up $2 to $86.69; Merck, up $2.38 to $90.31; and Johnson & Johnson, up $2.69 to $62.38.
* Nasdaq was buoyed by Sun Microsystems, up $2.25 to $34.63, and Dell Computer, up $2.06 to $79.13.
* Drug issues gained. Lilly added $3.25 to $66.88, Pfizer advanced $2.31 to $71.31 and Merck rose $2.38 to $90.31.
The latest development in the Middle East prompted a rise in oil prices as traders bought petroleum as a hedge against possible disruption of oil shipments if hostilities break out.
Clinton ordered a second U.S. aircraft carrier to move within striking distance of Iraq and said U.N. weapons inspections there must continue.
At the New York Mercantile Exchange, crude oil for December delivery closed 30 cents higher at $21 a barrel. December gasoline finished up 1.44 cents a gallon at 60.99 cents, and December heating oil ended 0.92 cent a gallon higher at 59.54 cents.
Market Roundup, D4
