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Gold gains ground as dollar weakens;
Metal may make run at January's $433 high, analyst says

By Myra P. Saefong
CBS.MarketWatch.com
Monday, March 15, 2004

http://cbs.marketwatch.com/news/story.asp?
column=Metals+Stocks&siteid=mktw

Gold futures climbed Monday to close just 40 cents short
of $400 an ounce as weakness in the U.S. dollar following
last week's terrorist bombings in Madrid sent traders
scrambling to find a safer investment bet.

"The Madrid bombings and their effects on the global
financial markets are going to be the watchword for gold
traders this week," said Grady Garrett, chief trading
strategist at EnergyTrendAlert.com, a commodity
information provider.

Speculation is growing that al-Qaida had a hand in the
Thursday bombing, he said, noting that the attack
occurred approximately 911 days after the Sept. 11,
2001, attacks in New York and Washington and that
al-Qaida has "a penchant for anniversaries."

Against this backdrop, gold for April delivery closed at
$399.60 an ounce, up $4, on the New York Mercantile
Exchange. The contract fell more than $5 in Friday's
session.

The U.S. dollar traded mostly lower against major rivals
Monday as investors weighed global terrorism risks
against reports showing strong foreign demand for U.S.
assets and improved factory output. Weekend reports
revealed a possible connection between al-Qaida and
the Madrid train bombings.

"The attacks seemed to modify the voting patterns of
the Spanish electorate," said Garrett, underscoring the
surprise 11th-hour Socialist victory in Sunday's general
election in Spain.

He said he's going to be looking to see if Spain's election
results are read as a sign of appeasement. "Appeasement
is going to embolden al-Qaida," potentially encouraging
more attacks, Garrett said.

In the bigger scheme of things, "the threat of an ongoing,
expensive war against terrorism, increased federal
spending with record budget deficits, and a Fed policy that
favors extremely low interest rates all make it likely that
the three-year uptrend in gold prices will continue higher
this year," said Todd Hultman, president of commodity
research provider Dailyfutures.com.

Meanwhile, "gold is showing that there is extremely good
buying interest under the $400 level," said John Person,
head financial analyst at Infinity Brokerage Services.

In the next month or so, the precious metal's futures price
should "challenge" highs around $433 reached in January
and possibly exceed that level by mid-May, he said,
adding that his "upside targets" are $450 and then $475.

Person bases his expectations on a return to a weaker
dollar, increased tensions around the globe, and the trend
in higher commodity prices based on demand not only in
the United States but in Europe and China as well.

"Gold has spent the better part of eight weeks consolidating
after it made its high in January, and it is starting to base
itself before advancing into the next leg of what I feel may be
a substantial run to the upside," he said.

Meanwhile, other metals trading on Nymex closed higher as
well, coinciding with flight-to-quality buying in gold. "It just
does not stop there either -- the entire metals complex
including platinum, palladium, and even base metals such
as copper are higher," Person said.

May silver rose 7.7 cents to close at $7.14 per ounce. May
copper climbed by 3.55 cents to end at $1.349 per pound.

June palladium tacked on $1.20 to close at $279.75 an
ounce. Platinum for April delivery closed at $914 an ounce,
up $6.90.

On the supply end, copper supplies were down 473 short
tons at 232,903 short tons as of late Friday, according to
Nymex. Silver stocks were down 1.17 million troy ounces
at 122.8 million troy ounces.

Gold inventories stood at 3.53 million troy ounces,
unchanged from the previous session.

Also Monday, metals and mining equities ended lower,
defying the general strength in the metals futures, and
pulling key sector indexes to fresh one-month lows.

"Because the rise in gold has been aided by short-term,
unpredictable events, rather than longer-term monetary
trends, the mining share investors have been reluctant to
put their stamp of approval on the move," said Brien
Lundin, editor of Gold Newsletter.

"If geopolitical events continue to batter the dollar much
longer, however, and are bolstered by dollar-bearish
economic data, then you'll see mining stocks climb on
board as gold's rally accelerates," he said.

Tracking the mining sector as a whole, the Philadelphia
Gold & Silver Index fell 2.3 percent to close at 96.3 and
the Amex Gold Bugs Index fell 2.9 percent to end at
215.6.

The CBOE Gold Index closed at 83.04, down 2.4 percent.

Leading the indexes lower were shares of Coeur d'Alene
Mines, which lost 42 cents, or 6 percent, to close at $6.62,
and Durban Deep, down 20 cents, or 6.1 percent, to end at
$3.08.

In other metals action, shares of Wheaton River climbed 3
cents, or 1 percent, to close at $2.95 after the
Vancouver-based precious metals producer reported a net
profit Monday of $27.8 million, or 6 cents per share for the
fourth quarter. A year earlier, it earned $2.6 million, or a
penny per share.

"Our results are nothing short of spectacular," said Ian
Telfer, Wheaton's chief executive. And "current metals
prices are significantly higher than the 2003 prices realized
by Wheaton, which should have a continued positive impact
on results moving forward," he said. The company's stock
was trading at 82 cents a year ago.

Shares of Alcoa closed at $34.11, down $1.01, or 2.9
percent. The aluminum-producer said Monday that it's
selling its Russellville, Ark., and St. Louis foil facilities.
Terms were not disclosed.

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