The price of gold plunged on world markets yesterday in reaction to the administration's support for the dollar. The measures announced included doubling the amoung of gold from U.S. stocks to be sold at auction.
In London, the closing price was $227 an ounce, off from $242.125 the previous day. In Zurich, the price of gold dropped to $224.50 from $243.875 Tuesday. The record high came on Monday when gold closed in London at $242.75 an ounce.
At yesterday's monthly International Monetary Fund action of 470,000 ounces of gold, the average price per ounce was $224.02. Bids were received for 389,000 ounces at prices ranging from $223.03 to $230.Another 80,000 ounces was awarded to member countries at the average bid. The sale's total of 550,000 ounces came to $98 million. Proceeds go to developing nations.
The amount of U.S. gold scheduled for sale at the December Treasury auction will be increased to "at least 1.5 million ounces." At today's prices, that could mean gross proceeds of about $335 million compared with [WORD ILLEGIBLE] million realized at the October sale when 300,000 ounces were sold.
The Treasury has been auctioning U.S. gold for the past six months in an effort to weaken the price of the metal. Several months ago, the government announced there would be an increase in the November auction to 750,000 ounces.
The price of gold has been rising steadily since April of this year when the price stood just below $170 an ounce. At Deak & Company, a [WORD ILLEGIBLE] and coin dealer, Glen Kirsch described the atmosphere there yesterday as hectic. Still, he added, not that much selling took place, as some investors bought to average down their accounts. "The reaction was not as great as many people had thought it would be," Kirsch said.
In both Chicago and New York commodities markets, the price of gold for future delivery fell the $10 limit allowed by exchange rules. The Chicago price for December delivery was $230.50: on the New York Commodity Exchange, November gold dipped to $223.10. February gold fell to $234.80.
Volum on Tuesday had reached a record 43.411 contracts, after the previous day's December high of $247 an ounce. Volume yesterday plummeted to 5.545 contracts as would-be gold sellers found no takers.
ComEx Vice President Robert Trentham said this shows investors are trying to get out of long positions in gold. Impositions of the limit decrease on metals is a most infrequent occurrence, he added; swings in gold prices rarely exceed $10.