Gold dips as oil price drop eases inflation fears

November 30, 1993|By Bloomberg Business News

NEW YORK -- Gold prices tumbled $7.80, to $369.40 an ounce, as the decline in oil prices cooled fears that inflation was about to stage a return.

"What you are seeing today is the reaction to the drop in oil prices," said Marc Cohen, an analyst with Kidder Peabody in New York.

Gold prices tend to drop when prospects of inflation diminish because investors buy gold as a hedge against inflation, which threatens the value of other assets.

Yesterday's drop after two weeks in which gold prices hardly changed does not mean an expected rally in gold prices will not materialize, traders said. They pointed to strong demand from China and India, and said that a growing imbalance between rising demand and stagnant supply could push prices higher even if inflation stays low.

"In the long run, supply and demand are on our side," said Jon Nadler, vice president with Bank of America in San Francisco. "These six-dollar moves don't really mean much."

Prices of other precious metals registered even greater drops than gold's 2 percent decline yesterday. Silver fell 20 cents, or 4.2 percent, to $4.44 an ounce, while platinum lost $9.40 an ounce, or 2.5 percent, to $366.30 an ounce.

Gold prices had settled between $375 an ounce and $380 an ounce for 12 of the past 14 sessions.

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