By Jan de Lange Sake, South Africa March 13, 2001 http://www.news24.co.za/News24/Finance/Markets/0,4186,2-8- 21_994927,00.html Gold's bull run of the past few days could easily turn into a stampede, says Fedsure's highly regarded analyst Nick Goodwin. The gold price rose jumped to US$274/oz on Monday morning and was trading at around $272/oz at the close of trade in New York. The contradiction that the gold price has remained depressed for years despite physical demand exceeding supply, is coming to an end, says Goodwin. The phenomenon resulted from banks lending gold to speculators at a 1 percent lending rate. The lenders then sell the gold and invest the proceeds at 5 percent above the lending rate to secure a quick profit. They then return the gold to the banks when prices fall, often cashing in further. "Banks do, however, have less gold available to lend," says Goodwin. That's why the official lending rate of European banks shot up again by 6 percent last week. On the back of this development, the gold price surged from $261/oz to $271/oz on Friday. The lending rate for a month's contract is already three times as high as a year ago, the highest level since September 1999 when the price suddenly surged to over $340/oz. The physical demand is starting to exert pressure and speculators are being caught short. This is the underlying reason for the sudden price increase recently despite an auction of 25 tons of gold to be held by the Bank of England this week. Goodwin says the court case against U.S. Federal Reserve chairman Alan Greenspan and several banks brought by the Gold Anti-Trust Action Committee has caused jitters in the market. Merrill Lynch analyst Johan Odendaal says there is a large degree of short-covering in the gold market. "Everything is poised for the gold price to move. Conditions are similar to what they were in September 1999 when lending rates rose sharply," he says. -END- ------------------------ Yahoo! Groups Sponsor ---------------------~-~> <FONT COLOR="#000099">Make good on the promise you made at graduation to keep in touch. Classmates.com has over 14 million registered high school alumni--chances are you'll find your friends! </FONT><A HREF="http://us.click.yahoo.com/l3joGB/DMUCAA/4ihDAA/WyOVlB/TM"><B>Click Here!</B></A> ---------------------------------------------------------------------_-> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
