''Midas'' commentary for May 22, 2001

10:40a ET Tuesday, May 22, 2001

Dear Friend of GATA and Gold:

Interesting references in this London Telegraph
story to China's gold buying and the loss that
the Bank of England has incurred in its program
of gold sales.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

a href=http://money.telegraph.co.uk/money/main.jhtml;$sessionid$T2Y0BJYAAAHOVhttp://money.telegraph.co.uk/money/main.jhtml;$sessionid$T2Y0BJYAAAHOV/a
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Investors race for 'safe haven' gold

By George Trefgarne
Financial Correspondent
May 22, 2001
The Telegraph, London

The price of gold leapt 7pc yesterday - its biggest rise for
nearly two years - as the precious metal dramatically
rediscovered its traditional status as a safe haven from
nflation and other uncertainties.

The price is fixed in London at investment bank NM
Rothschild and in the afternoon was fixed at $291.25 an
ounce, up $18.10 since Friday. In late trading, it dropped
back slightly to close at $290, up $16.85. It was the
highest close since June last year.

Worries have suddenly emerged that the recent
aggressive interest rate cuts by the US Federal
Reserve could have gone too far. There are also
umours that the Bank of China is converting its dollar
holdings into gold as a result of worsening relations
with America.

Fears over inflation gained ground during the day
as the price of oil jumped perilously close to the
$30 a barrel mark amid heightened tensions in
the Middle East. The benchmark Brent oil contract
on London's International Petroleum Exchange
rose 29 cents to trade as high as $29.68 a barrel.

Peter Beaumont, a gold analyst at UBS Warburg,
said: quot;There is no doubt that US inflation is one of
the key elements. The investment picture has
changed in the last quarter; we have fears of
inflation again. I think it's not unreasonable to
expect prices above $300 in two to three weeks.quot;

The sudden rally in gold will be welcomed by
the industry. Since reaching a peak of over $800
in 1981, the metal has been on an almost constant
downward trend. However, the metal is prone to
dramatic moves.

For several years, hedge funds have sold it short
in the expectation that prices will fall and occasionally
they get caught out. Yesterday, many of these funds
were forced to reverse their trading positions rapidly.

The same thing happened in September 1999
when the world's leading central banks said they
would sell no more of their holdings.

Peter Hambro, chief executive of Peter Hambro
Mining and an experienced hand in the gold
market, said he first noticed big signs of excitement
at a conference organised by the World Gold
Council last Friday. This caused traders in Asia,
where markets were open over the weekend, to
drive the price up by more that $22 to $296.

quot;There is a fairly significant sea-change in thinking,quot;
he said. quot;Inflation in the US is certainly a concern
and with the euro looking dodgy and the yen under
pressure, gold is as good a place to put your
money as any. Mind you, some people say that
is an old fashioned view.quot;

He said there are also strong rumours that the Bank
of China has become a big buyer of gold. It holds
$130 billion (92 billion) of foreign exchange
reserves and as relations with the US deteriorate
it is switching them out of dollars into gold.

quot;I suppose they don't want their reserves managed
by the central banker of the enemy, Alan Greenspan,quot;
he said.

Another source of gold buying is said to be the
ntroduction of euro notes and coins on the Continent.
quot;All those five hundred franc notes under mattresses
will soon be worthless,quot; said Mr Hambro.

One person who will not welcome the rise in gold is
Gordon Brown. In 1999, he ordered the Bank of
England to sell 415 tonnes of its 715 tonnes holdings.

So far, the Bank has lost money on the trade, having
sold 145 tonnes, at around $265 an ounce. The latest
auction was last Wednesday when the Bank sold 20
tonnes at $268 an ounce.