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Investors Finding Comfort in Gold

Demand for futures contracts sends price to $381.70, its highest close in almost seven years.

September 10, 2003|From Reuters and Bloomberg News

Gold's price zoomed Tuesday to its best level in almost seven years, driven in part by a weaker dollar and by nervousness ahead of the anniversary of the 2001 terrorist attacks.

Near-term futures contracts in New York soared $6.60 to $381.70 an ounce, surpassing the previous 2003 closing high of $379 reached Feb. 4.

Gold now is at its highest since November 1996.

Analysts say the metal's jump in recent weeks has been powered by hedge funds and other speculators using futures contracts, rather than by a surge in demand for the commodity itself.

Indeed, the U.S. Mint said its sales of American Eagle gold coins to dealers totaled 30,500 ounces in August. That was up from 24,500 in July but down from 42,000 in August 2002.

In futures trading gold has jumped nearly $36 an ounce, or 10%, since Aug. 1.

The dollar's sudden weakness in recent days has helped make gold cheaper for some foreign buyers by strengthening their own currencies. The euro, which a week ago was at its weakest level in four months against the dollar, has rebounded amid concerns that the U.S. economy may lose steam.

The euro soared to $1.124 on Tuesday in New York from $1.110 on Monday.

With the anniversary of the Sept. 11, 2001, attacks looming, some investors were buying gold on fears that terrorists could strike again, traders said.

"People are taking gold for what it is, which is a safe investment," Michael Spano, an independent trader in New York who manages a portfolio that includes about $19 million in gold futures, told Bloomberg News.

Gold mining stocks rallied with the metal. Newmont Mining rose 86 cents to $39.76; AgnicoEagle added 47 cents to $14.60.

From Times Staff and Wire Reports

SEC Chief Criticizes 2 Attorneys General

Securities and Exchange Commission Chairman William Donaldson on Tuesday criticized the Oklahoma and New York attorneys general for leaving Washington out of the loop on separate actions involving WorldCom Inc. and alleged improper trading in mutual fund shares.

"Unfortunately, there's been a politicization, if you will, of enforcement in some areas of the country. This is very dangerous," Donaldson said at a Senate Banking Committee hearing.

Oklahoma Atty. Gen. Drew Edmondson last month charged WorldCom, its former chairman, Bernard J. Ebbers, and five other former officers with breaking state securities laws. WorldCom and its executives have been under federal investigation for months, and the company is trying to emerge from a bankruptcy reorganization.

Federal regulators are concerned that the Oklahoma action, and any other state charges that may follow, could complicate and undermine their case.

"When you have people coming in from left field who are not communicating with people who are handling these procedures ... that's extremely dangerous," Donaldson said.

"To my knowledge, Oklahoma, just to cite an example, did not consult with the authorities that were handling the case.... They certainly didn't consult with the SEC, and I think that's not good," he said.

In another example of a state acting independently, New York Atty. Gen. Eliot Spitzer last week accused a hedge fund, Canary Capital Partners, of improper trading in shares of mutual funds sold by Bank of America Corp., Bank One Corp., Janus Capital Group Inc. and Strong Capital Management Inc. Spitzer did not charge the fund companies with wrongdoing but said he was continuing to investigate their roles in Canary's alleged schemes.

Donaldson commended Spitzer but added, "We wish that he'd talked to us about it."

According to published reports Tuesday, the SEC is investigating brokerage Prudential Securities for possible violations in trading fund shares. The SEC's probe of Prudential's Boston office follows allegations by Massachusetts securities regulators that some of the firm's brokers traded in and out of funds for quick profit, at the expense of long-term investors.

After Spitzer unveiled his probe last week, the SEC said it was seeking information on trading practices from several mutual fund companies.

From Reuters and Bloomberg News

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