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Commodities : Metals Soar; Bonds Plunge

September 03, 1987| From Associated Press

Precious metals futures prices soared while bond futures plunged in value, both affected by weakness in the dollar.

Traders attributed the sharp move in gold and silver futures to the slumping dollar and tensions in the Persian Gulf.

Active interest in precious metals developed overnight in Europe and continued when the U.S. markets opened, said Stephen W. Platt, and analyst with Dean Witter Reynolds.

"It was a flight into hard assets away from stocks and bonds," he said, adding that he sees this as only a short-lived rally.

"The market is testing the Federal Reserve to see how aggressive they'll be in supporting the dollar," said Platt. "So far, they haven't been that aggressive. But maybe they'll raise the discount rate or actively intervene to support the dollar."

The discount rate is the interest the Fed charges to member banks. It is closely watched as an indication of the Fed's credit policis.

Another analyst, Peter Cardillo of Josephthal & Co., assigned much of the gain in metals to the conflict in the Persian Gulf, in addition to the weaker dollar and sharply lower bond market.

Treasury bond futures at the Chicago Board of Trade plunged 2 points.

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