Gold, Precious Metals Surge on Inflation Fears
Gold and other precious metals futures surged for the second-straight day Friday on the New York Mercantile Exchange after government economic figures reinforced fears of runaway world inflation.
Gold prices in the April and June contracts reached $400 an ounce for the first time since early last fall before meeting resistance and falling back.
Investors flock to precious metals in times of world instability because the metals generally retain their value when other holdings such as stocks and bonds decline.
``With currency instabilities intensifying, the question is where does one place one’s money? More and more, they’re beginning to look at metals as the alternative,″ said Bette Raptopoulos, metals analyst with Prudential Securities Inc. in New York.
On other commodity markets, cotton moved higher after the Agriculture Department reported more southern farmers planned to plant cotton this spring. Lumber futures prices also dipped to a 20-month low.
The Commodity Research Bureau’s index of 21 commodities rose 0.23 point to 232.94.
April gold surged $5.70 to $392.20 a troy ounce; May silver climbed 7.3 cents to $5.31 a troy ounce. July platinum rose $5.10 to $443.20 an ounce.
Investors moved to precious metals as the U.S. dollar plunged once more against the German mark and to post-World War II lows against the Japanese yen.
Gold prices have risen nearly $10 in two days, while silver prices advanced about 54 cents.
Futures prices rose Thursday after the troubled dollar received a boost from an interest-rate cut by Germany’s central bank. That unnerved investors who had put their money in marks and Swiss francs.
Prices also rallied Friday after the Commerce Department said the economy grew by 4.1 percent last year _ the fastest growth since 1984, in the final year of President Reagan’s first term.
That announcement sent the stock market tumbling amid reignited fears that a rapid expansion of the economy could lead to inflation.
May cotton climbed 1.52 cents to 98.15 cents a pound on New York’s Cotton Exchange. It was the second day of advances, following five days of declines after speculators bailed out of the market.
The USDA survey of farmers intentions found that cotton growers plan an 18 percent increase in planted acres, with a 44 percent increase in the Southeast. The report surprised analysts.
``I think it caught some people flat-footed,″ said analyst Tom Bell. ``It’s not only lower than analysts’ expectations, it was about 300,000 acres below trade expectations.″
Analysts had expected to see large planting increases in the wake of record prices this year, which were boosted by disastrous crops in China, India and Pakistan.
Lumber futures prices fell on the Chicago Mercantile Exchange as mills further reduce purchases. The mills have been trying to shrink their inventories because rising interest rates have slowed the housing market and cut demand for lumber.
May lumber fell $6.50 to $268.50 per 1,000 board feet.