Investors seek havens in gold, U.S. dollar, Treasury notes Gold, dollar surge on news from Russia

September 22, 1993|By Bloomberg Business News

NEW YORK -- Russian President Boris Yeltsin's decision to dissolve the country's parliament triggered rallies in gold, the dollar and U.S. Treasury notes.

"Obviously, it was a classic case of 'run for cover' in times of crisis," said Ian McDonald, manager of precious metals marketing for Credit Suisse in New York. "Whether it's a crisis or not, it's very early to say."

Yesterday, Mr. Yeltsin disbanded the Congress of People's Deputies and the Supreme Soviet, the standing legislature, and called for new elections Dec. 11 and 12. Legislators have been stonewalling his reform plan for over a year.

Deputies named Vice President Aleksandr Rutskoi, stripped of some powers by Mr. Yeltsin last summer, as acting head of state. Last evening in Moscow, Parliament Speaker Ruslan Khasbulatov called for a general strike and asked authorities to disobey Mr. Yeltsin's order.

Gold, historically viewed as a haven amid turmoil, soared $9.50, to $365 an ounce, as people bet the unrest would disrupt the supply of the metal from the country's mines.

The former Soviet Union is the world's fourth-largest producer of the metal, accounting for more than 10 percent of new mined production each year.

"There's euphoria surrounding the news," said Scott Meyers, a commodity analyst with Redel Trading in New York. To be sure, xTC it's still too early to tell whether the higher prices would stick, he said.

Elsewhere in the metals markets, silver jumped 9.3 cents, to $4.215 an ounce, and platinum gained $5.10, to settle at $368.40 an ounce.

Meanwhile, the dollar surged against European currencies, particularly the mark. Germany is Russia's biggest creditor, and is therefore vulnerable to its political problems.

The dollar jumped almost four pfennigs, to 1.6480 marks, before closing at 1.6408 marks, up from 1.6095 marks in New York Monday.

The dollar also rallied against the yen amid signs that the U.S. was satisfied with Japan's efforts to jump-start its economy and spur demand for U.S. imports. The Bank of Japan slashed its key discount rate yesterday morning to 1.75 percent from 2.5 percent. It jumped to 106.35 yen from 104.61 yen in New

York.

International turmoil often sends the dollar higher as investors seek what they perceive to be safer investments.

"The market's reaction was probably justified," said David De Rosa, director of foreign-exchange trading at Swiss Bank Corp. "At minimum, this is a full-blown constitutional crisis."

In the Treasury market, yields on bills and notes dropped as much as 10 basis points from the day's highs as concern about Russia's political stability sent traders and investors rushing to own government-guaranteed U.S. debt.

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