News of record demand for gold at Tuesday's Treasury auction has helped send market prices soaring the past two days. Due to a new, complicated, two-tier system of bidding, actual auction results were not released until yesterday.
Demand outstripped supply by more than four to one as bidders tried to buy 6.8 million ounces of gold. Only 1.5 million ounces were for sale. The average price for fine gold was $219.71 per Troy ounce.
Yesterday on the London market, gold closed at $228.50 an ounce, a jump of $7.125 from the previous day. Gold futures on New York's Comex were up substantially both days.
The largest successful bid at the Treasury auction was made by the Dresdner Bank of Frankfurt, which bought 591,300 ounces. Other large bidders were Johnson Matthey Ltd. of London and Mocatta Metals Corp. of New York. The Bank of Oman, located in the United Arab Emirates made an unsuccessful bid for one million ounces.
Gross proceeds from the sale were $328.8 million. It was the ninth monthly gold auction by the U.S. government, which is trying to depress international gold prices, in order to bolster the dollar by reducing its gold stocks.
Separate bids were solicited in a two-tier auction for different grades of gold. One million ounces of bullion with a fine gold content of 99.5 were sold to 18 successful bidders at prices ranging from $219.23 to $222. (This is the quality of gold normally traded in international markets.)
Half a million ounces with a 90 percent gold content (the remaining 10 percent is mainly copper alloy) were also sold to 22 bidders at prices ranging from $217.51 to $220.93. The average price of the monetary gold was $218.22 per ounce.
The next sale of 1.5 million ounces is set for Feb. 20.