European banks were the big buyers yesterday as the U.S. Treasury auctioned off 300,000 ounces of fine gold from its stockpile. The average price was $180.38 per ounce.
The largest bidders at the first American gold sale in three years were the Swiss Bank Corp. of Zurich, which purchased 906,400 ounces: the Dresdner Bank of Frankfurt, with 97,600 ounces, and the Union Bank of Switzerland in Zurich, buyer of 50,000 ounces.
U.S. firms tended to bid below yesterday's afternon London gold fix of $179.75. The winning bids ranged from $180.01 to $182.35.
Demand outstripped supply fourfold as bids for 1.3 million ounces were, made. Total proceeds of yesterday's sale were $54.1 million. Of that sum, $12.7 million will be used to rtire gold certificates and the rest will go into the Treasury.
The avowed purpose of these sales is to reduce the U.S. trade deficit. Stated another way, the government is selling bullion to discourage the exchange of paper money for metal by depressing the price of godl. Yet, because of the small amounts involved - South Africa produces more gold in a month that the U.S. plans to sell in a year - the effect on the market is expected to be mainly psychological.
The International Monetary Fund has been auctioning over half a million ounces of gold monthly for the past two years with little effect on prices. Demand at the last IMF auction in May was very heavy on the part of European central banks which accumulated surplus dollars earlier this year when they bought heavily in an effort to shore up the dollar.
The Treasury intends to sell 1.8 million ounces in six monthly auctions. The next sale is set for June 20.
The highest bidder was Morris Cannan, a San Antonio oil and gas producer. He bid $182.35 an ounce for 800 ounces, totalling $145,880. Reached at his office, Cannan said he was surprised to find himself in competition with Swiss banks.
He added somewhat sheepishly, "I increased my bid at the last minute by 70 cents an ounce; I guess I went a bit too high." Cannan, who has never before owned gold, found out last week that individuals could participate in the auction, and "I just took a run at it."
This was the U.S. government's first gold auction since 1975, when two were held. At the first sale in January of that year, the Dresdner Bank alone accounted for 402,800 of the 750,000 ounces sold. The bank paid between $155 and $174 an ounce for its gold, for total outlay of $60 million.
Two million ounces were offered in that sale, but only 37 percent of it was sold, some of it at $20 below the closing market price.
Six months later, at the second auction, 750 bids were received with offers far exceeding the 500,000 ounces the Treasury wished to sell.
Under the terms of that auction all purchasers paid the same price, $165.05 per ounce, or about $1.20 under that day's closing price in London. The largest single buyer was the Swiss Bank Corp. of Zurish, which bought 140,000 ounces. The next six successful bidders were all banks and gold dealers from New York, London and Geneva.
Other large bidders at yesterday's sale were:
Republic National Bank of New York which made seven unsuccessful bids totaling 80,000 ounces, ranging from $179 to $179.76.