The price of gold surged past $800 an ounce for the first time today in one of the most hectic trading days ever.
Gold closed at $802 an ounce in New York, $58 higher than its close Wednesday.
In a day filled with wild price swings -- exacerbated by rumors of increasing military tension in the Middle East -- the price of gold fell to as low as $715 an ounce in early trading and then climbed to as high as $820 an ounce at one point this afternoon.
The prices of other precious metals skyrocketed as well. Silver closed up $3 an ounce to $48.70, while platinum jumped $35.70 to $918 an ounce.
The dollar, meanwhile, stayed out of the precious metals tray. It gained strength against most major currencies except the British pound.
While dealers reported that trading in foreign currencies was active, trading in precious metals was feverish, as it has been for the last month.
"I've never seen such violent price swings before," said one trader on the New York Commodity Exchange, the major U.S. gold market.
Gold started the day on the decline in Hong Kong and then Europe.
"People who have made literally millions of dollars in the last few weeks said to themselves, 'That's great,' and took some profits," according to Marc Berkowitz, with the gold trading firm of Sinclair & Co.
Only a month ago gold was selling for about $450 an ounce. The day after Christmas it passed $500 and a week later rose above $600. On Tuesday it crossed the $700 barrier.
Just before the U.S. gold markets opened today, London gold was trading for about $725. When the markets opened here the price nosedived from Wednesday's $744 close to as low as $715.
But then both in late London trading and in New York the price began to climb again. By 11 a.m. gold had surged to $750 an ounce in New York. London dealers set their afternoon consensus price at $750 as well.
"It was the fastest runup I'd ever seen. Except for this afternoon," said Berkowitz.
After trading in the $750 to $755 range until about 12:15 p.m., prices began to shoot up again. Before 1 p.m., the price touched $800. A few minutes later it hit $820.
"It was incredible. The price was going up $10 a crack. There were just no sellers. People were standing around offering to buy at $750, then $760, and on up," one trader said.
"It wasn't until the price got to $790 that there was any two-way trading at all. There were people who made $40 profit an ounce in 10 minutes," said Berkowitz.
Traders were apparently panicked by a series of reports and rumors that swept the Commodity Exchange, including one that had Chinese troops massing on the Afghanistan border and another that had the Soviet Union marching into Iran.
"There were absolutely no confirmations of these rumors, but when markets are as nervous as these are, it doesn't take much to set them off," said one floor trader.
Analysts say that while the current price swings may be wilder than usual, the price of gold will continue to march upwards until there is a resolution of the crises in Iran and Afghanistan. Even then, they say, it is doubtful that the Middle Eastern investors who have been buying up much of the gold and hoarding it will sell any of their stash.
"you'll get your occasional fits of profit taking like we saw today, but fundamentally must gold buyers aren't buying it with a view to sell it at a handsome profit. They're buying it as an insurance policy, in case their regimes get shaky and they have to get out," according to one analyst.
Much of the gold buying is coming from the Middle East, oil rich countries like Kuwait and Saudi Arabia, analysts believe. But it is merely impossible to find out who is buying the gold, because big buyers operate through agents such as Swiss and German banks.
Treasury Secretary G. William Miller's statements Tuesday that the U.S. does not plan to sell any more gold in the near future has also contributed to this week's price boom.
The dollar, which suffered during gold binges of earlier years, continued to hold its own today as it has for the last several months. In West Germany, the dollar closed at 1.7233 marks, compared with 1.7215 marks Wednesday. The dollar could buy 1.5897 Swiss francs today, slightly more than the 1.5840 francs it was worth Wednesday. The dollar closed up sharply in Japan to 239.70 yen, compared with 237.90 yen Wednesday.
Only the pound gained against the dollar today, closing at $2.2772 from $2.2692 Wednesday.