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Platt''s reports Bamford letter to treasury secretary

Section: Daily Dispatches

By Michael Kosares
Friday, March 9, 2001

Gold roared higher this morning spurred by international physical
buying for portfolio insurance purposes, short covering, rocketing
short-term gold lease rates (now at 6.275 percent) and aggressive
speculation that the price is headed higher.

At the top of our Daily Market Report page we have a quote from
analysts David Skarica, which reads: quot;It is our feeling that the
short position is so huge in gold that gold will not undergo a
gradual increase, but rather a huge short covering rally which will
cause the greatest spike in any commodity ever.quot;

Are we there? I can't tell you for sure, but even those who watch the
gold market casually now sense that something is different this time
around. Are we in a gold bull market? We shall see. The next few
trading sessions will go a long way toward defining this as another
false start or a true breakout.

Today's almost $4 jump has all the appearances of a short covering
rally, but unlike past bouts of short covering this one is
accompanied by some pretty sound fundamentals. (as outlined above)
One London trader told Dow Jones News Service, quot;Gold could break
$270/oz resistance as there are a lot of buying orders at $274/oz.
The price could go to $274/oz and then $300/oz. Whether gold
continues to rally depends on what happens in New York Friday
evening, the trader added. If some of the shorts start to cover their
positions due to the higher price and high interest rates, then the
others will follow.quot; Craig Ferguson of J.P. Morgan added that quot;It
does look as if the gold market has a lot of momentum at the moment.
It is virtually guaranteed that there will be short covering in New
York (later Friday), as the speculators will see the higher lease
rates. It will be so expensive to loan gold, they'll have to buy back
their positions.quot;

So we will be watching New York with a great deal of interest today.
Keep in mind that the foundation for this gold rally is the fact that
investors around the world are purchasing gold for insurance
purposes. The buying is being driven by inflation concerns, the
burgeoning energy crisis, limp stock markets and concerns, that the
dollar -- gold's chief competitor -- is in for some rough sailing.
That's not going to go away. If today's action turns out to be driven
essentially by short-covering, we should keep in mind that the buy-
backs are occurring in far different environment than even the post
Washington Agreement run-up -- one more conducive to an orderly rise
driven by fundamentals.