The Rush That Wasn't

Had previous U.S. gold rushes gone anything like the one that began last week, California would have been short of settlers and Poet Robert Service would never have written about the cremation of Sam McGee in the Klondike. Legally free as of Dec. 31 to buy bullion for the first time in 41 years, Americans greeted the opportunity with a veteran prospector's wariness of fool's gold. The caution seemed justified. By week's end, after three full days of trading in the yellow metal, gold's price stood at $174 per ounce on the bellwether London Gold Market, down 12% from the high of nearly $200 set just before G-day.

Curiosity ran high in many parts of the U.S., jamming switchboards of precious-metals dealers and brokerages offering the metal. But actual sales were slow. During the first two days of trading, not a single sale was made in any of European-American Bank's 104 branches in the New York City area. Trading was brisk on half a dozen U.S. commodity exchanges, where gold-futures contracts were being traded along with futures for frozen pork bellies, hogs, cattle and eggs. In the first half-hour of frenzied trading at Chicago's Mercantile Exchange, dealers bought and sold no fewer than 452 contracts for future delivery--the biggest opening on the exchange, they said, since boneless beef made its debut as a traded commodity in 1970. But speculators were betting that gold's price would go down, with most contracts off $15 or more from their highs earlier in the week.

Further downward pressure on the metal's price seems likely this week, when the Treasury will sell 2 million oz. from its 276-million-oz. stockpile. Purpose: to meet U.S. demand with U.S. gold and thus prevent dollars from flowing out of the country to buy imported metal. Buyers had additional reason to be hesitant. Several leading banks announced that they would not sell gold because of the costs and risks to unsophisticated investors. The National Association of Securities Dealers told the members to exercise "great caution" in gold dealings, warning that no federal mechanism exists to protect investors.

Risking It. For some purchasers, the risks were outweighed by the intangible rewards of being among the first Americans to get in on the gold action. A Michigan girl, twelve-year-old Carlenne Brown of Bloomfield township, claims to be the first buyer of the yellow metal. At one second past midnight on Dec. 31, she signed an invoice for a quarter-ounce wafer, bought for $52.79 through a publicity-minded Southfield, Mich., coin dealer; he obtained the wafer from a fellow dealer in nearby Windsor, Canada, and had it delivered to his shop by car and helicopter.

The girl's purchase underscored the fears of some Washington officials that legal gold will only draw funds from more socially worthwhile investments: to get up the $52.79, Carlenne cashed two U.S. savings bonds. As an object lesson in the personal hazards of gold ownership, there is the experience of New York's Conservative-Republican Senator James Buckley. A vigorous backer of legal gold on the Hill, Buckley triumphantly plunked down $480 to buy three wafers totaling 2 1/2 oz. from a Manhattan dealer a few moments after it became legal to do so. At week's end his wafers were worth about $430.

This file is automatically generated by a robot program, so viewer discretion is required.