Newspaper article THE JOURNAL RECORD

Reports Cause Gold Prices to Tumble

Newspaper article THE JOURNAL RECORD

Reports Cause Gold Prices to Tumble

Article excerpt

Gold futures prices tumbled Wednesday amid reports that the United States has asked the International Monetary Fund to consider using its gold holdings to wipe out past-due loans to some of its member countries.

Traders feared that such a plan could lead to sales of several million ounces of gold on the open market.

On other commodity markets, oil futures were mixed; livestock and meat futures were lower; and grains and soybeans were mixed.

Gold futures settled $5.70 to $6.40 lower on New York's Commodity Exchange with the contract for delivery in February off $5.70 at $412.40 a troy ounce.

Silver futures followed gold, ending 1.1 cents to 1.7 cents lower with March at $5.228 a troy ounce.

The first report about the IMF said the United States had proposed the 152-nation lending agency sell $4 billion worth of gold to obtain cash needed to offset about $4 billion in delinquent loans to 15 of its poorer members.

That report prompted heavy selling of gold futures, analysts said.

A Treasury Department source told The that the actual proposal was that the IMF ``consider mobilizing'' a portion of the IMF gold holdings contributed by the delinquent members, amounting to less than 3 percent - or about $1.23 billion - of the 103 million ounces held by the IMF.

The source, who requested anonymity, would not elaborate on what ``mobilizing'' meant.

Market analysts said the United States probably was proposing to use gold as collateral to obtain loans from central banks to cover the past-due loans.

Still, said metals economist Fred Demler of Drexel Burnham Lambert Inc., ``even if you use it as collateral, a default could end up being a gold sale.''

Analysts said the gold market's weakness also reflected Wednesday's strong rally in the stock market and the prospects for steady, rather than lower, interest rates. …

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