High American officials expressed growing concern today over the unhealthy and volatile rise in the price of gold and hinted broadly at the possiblitiy of increased gold sales by the U.S. along with some European powers.
Meanwhile, Federal Reserve Chairman Paul A. Volcker, part of the American delegation to the joint annual meeting of the World Bank and International Monetary Fund, returned to the U.S. today, without even waiting for the first plenary session that began this morning.
Under Secretary of Treasury Anthony Solomon minimized the significance of Volcker's early departure, saying that Volcker had attended the more significant meeting yesterday of the interim committee and had sat in on key bilateral discussions here and in Hamburg with the West Germans on the critical dollar-mark problem. "He felt he could do more useful work in Washington," Solomon said.
But Solomon did not attempt to shield the anxiety now felt among top American policy makers over the unsettling effects of gold, now swinging from $405 to $440 an ounce, and the dip in the dollar against the mark.
He implied that the "more effective" intervention measures first discussed with the Germans in Hamburg last Saturday, and again in Belgrade would result in "around-the-clock intervention" in all foreign exchange markets in the world.
Asked if dumping more gold on the market could "break" the price Solomon said:
"I don't know how you define the work 'break,' but obviously you could bring about a very substantial price correction, depending on how big sales were. But that's terribly speculative."
Some analysts have urged the Treasury to increase sales and to keep the market guessing by varying the amounts and the regularity of its auctions.
Solomon said that agreement had been reached with the West Germans for better coordination of intervention policy to prop up the dollar, but added, "I am not in a position to comment in a detailed way. We will let actions (in the markets) speak for themselves."
Later, in saying "we have plenty of ammunition" to combat a further slide of the dollar against the mark, Solomon said he would not exclude a further mark-denominated bond issue, similar to one of the devices utilized in last November's dollar rescue package by which the U.S. acquired marks for intervention.
On gold, Solomon chose his words very carefully when asked if the Treasury might boost its regular sales of 750,000 ounces monthly in an effort to calm the gold market.
"We've said all along that we reserve the right to change that policy at any time," Solomon said, "and I'm not prepared to say anything further at this time." He added that he didn't know whether the spectacular rise in gold had a spillover effect on the dollar, which for the first months of the year had retained its stability, despite the rise in gold.
"The rapid rise in gold (prices) is an unhealthy phenomenon for the world as a whole." Solomon said. "It becomes an engine that reinforces inflationary concerns and there probably is a feedback that affects the dollar."
Asked whether his unwillingness to supply details at this time on a possible shift in gold sales policy foreshadowed a later announcement, Solomon said:
"Look, in this kind of situation, one keeps changes in policy under constant study; it doesn't mean you should draw an interpretation that some action is forthcoming. Now I am not excluding actions to change our position. But this is not heralding it or unheralding it."
Asked whether there had been discussions here on the possiblity of other nations joining the U.S. in a gold-selling effort, he said: "That has been discussed, and that's all I can say at this point."
He said that the U.S. was satisfied with the step taken yesterday by the Interim Committee for further study of a "substitution account," but warned that there would be protracted discussions, and that the account could not be expected to have any calming effects on the immediate gold and currency crisis.