Gold price: what goes up

The price of gold plunged around $140 on world bullion markets Tuesday, it sharpest decline ever, dipping to $680 an ounce before heading back up over $700 here at midday. The startling decline raised questions about whether the gold price boom, which began with the new year, had ended.

London dealers attributed the fall overseas to profit taking and concern over possible government curbs on gold dealings. The metal had touched a record $875 in New York Monday night before finishing around $822.

Dealers in New York said the price drop here was due to statements by the Federal Reserve chairman, Paul A. Volcker, that gold sales by the United States would tend to support the Fed's strict anti-inflation policies.

Also worrying the market was a report from Washington that the Us comptroller of currency was studying the role of banks in the gold market to see whether restraining action was necessary.

Meanwhile, the dollar strengthened against other major currencies in foreign-exchange trading. The dollar's strength in the face of the recent rapid gold price rise has been cited by US officials as one factor making gold sales by the Treasury unnecessary.