World commodity markets slump

Press, 10 March 1982, Page 23

World commodity markets slump

PA London Gold slumped on world bullion markets yesterday, dragging down the prices of severl other key commodities. Heavy selling of gold in New York brought the price there down to 5U5321.75 an ounce by midday, a drop of $12.25 during the morning and almost $5 less than the London closing price. The metal’s decline to a new two and a half year low led to a fall in prices of other commodities, although coffee hit an 18-month high in London because of a shortge of supplies for early delivery. Bullion dealers. said that gold’s slump was part of a long-term decline because of the world recession, high money interest rates, lower oil prices, and recent selling by Middle East oil producers and the Soviet Union. Gold, which hit a record $875 an ounce in January,

1980, has fallen almost $35, or nearly 10 per cent, during the past week. Confidence in the metal was further eroded when it passed the $325 level. Many dealers had expected buying to resume when it reached that point. Gold’s tumble was followed by a sharp drop in prices for copper, silver, and lead in London, and platinum sank to its lowest level since 1978. The price of gasoil, mainly used for home heating, dropped in near record trading to its lowest level since London’s gasoil market opened last April. Sugar also fell, sinking to the levels of late 1980. Analysts said the. gold market’s weakness was emphasised by the metal’s inability to respond to the cut in interest rates by several U.S. banks. They said interest rates, particularly in the United

States, continued to offer a high real return on investments and that gold would be vulnerable as long as this situation prevailed. The analysts said that declining confidence in gold’s traditional function as a store of wealth had been especially apparent in the Middle East. Oil producing countries were also being pressed to sell bullion in order to offset falling oil revenues, they added.