Precious Metals Stage Rally

Precious metals futures rallied sharply Thursday, with the market showing a weakening confidence in the banking system because of comments by Federal Reserve Chairman Paul Volcker.

Volcker commented to reporters and testified before the Senate Banking Committee on a range of economic issues.

Metals rallied late in the day after a report that he said Brazil’s economy is in serious trouble and that loans made to the country may be endangered, said Jack Barbanel, an analyst in New York with Gruntal & Co.

“The prospect of Brazil defaulting or its loans being rescheduled renewed some concern about the banking system,” he said.

“This lowers the confidence in the dollar and lowers the confidence level of foreign investors,” resulting in a flight to gold and other metals, said Barbanel.

Treasury bonds futures advanced sharply in early trading partly on expectations that stabilizing the dollar will be a main topic at the weekend meeting of officials of the United States, West Germany, Japan, France and Britain.

But the gains were trimmed toward the end of the day after Volcker’s comments about Brazil, Barbanel said.