The price of gold fell sharply today from the record high, which worries about Iran and oil supplies had driven it to the previous day. The dollar was narrowly mixed.
"It was a clear case of the market rising too swiftly and becoming overbought," said one London gold dealer as the metal closed at $242.625 an ounce. This was $7.125 lower than Thursday's close and $11.375 lower than the record high of $254 to which it rocketed at one stage earlier Thursday.
In Zurich, Europe's other major bullion center, gold closed less dramatically at $247 against $250.50 at Thursday's close.
Dealers said a bout of profit taking in a nervous and extremely busy market was a major cause of the falling prices. They said the price shot up Thursday to hit a new high for the third time in a week as investors frantically attempted to hedge against inflation. Their worries stemmed from the continuing crisis in oil-rich Iran and general concern about world oil supplies. Gold is a traditional refuge in times of uncertainty.
Foreign exchange dealers, meanwhile, reported the dollar was buoyed by a statement Thursday by U.S. Treasury Secretary Michael Blumenthal but depressed by latest wholesale prices in America and by the continuing unrest in Iran, which supplies the West with much of its oil. Blumenthal pledged America would continue support for the dollar and was determined to keep markets orderly. The bad news for the dollar from America was the announcement today of a bigger than expected 1.3 percent increase in producer prices in January.
In Tokyo, where the news came too late to affect the market today, dealers said the political unrest in Iran was the major cause of the dollar's poor week there. Last Friday, it closed at 202.25 Japanese yen. This Friday, it closed at 197.80 yen up from 196.70 at the close Thursday. But Teiichiro Morinaga, governor of the Bank of Japan, said he was sure the dollar would stabilize.
Here are closing European prices for the dollar compared with Thursday:
Frankfurt - 1.85 West German marks, up from 1.8457; Milan - 834.025 Italian lire, up from 833.25; Zurich - 1.6625 Swiss francs, down from 1.67, Paris - 4.24475 French francs, down from 4.25; Amsterdam - 1.995 Dutch guilders, down from 1.9995. In London it was marginally cheaper to buy a British pound. A pound cost $2.0030 against $2.0095.