It Was the Most Beautiful Day of the Year'

Mike Devaney, Chairman, Comex Governors Committee

Things were pretty quiet right after the opening. December gold - the active contract - was trading around $273 - then the price shot up to $280 on rumours that a bomb had hit the World Trade Centre. We were watching CNBC on the 50-inch television monitors in the pits. When people realised it was a plane, not a bomb, they thought it was an accident and gold sold back off. But it snapped back when the second plane hit. When the bomb went off in 1993, we'd been able to have a one- or two -minute close to wrap things up, but this time, we had to evacuate at once. Luckily it went very smoothly and we got everybody out.

Ed Jette, WestLB

It was just a normal Tuesday. And I know exactly what the guys who worked in the Trade Centre were doing that morning: drinking coffee and talking about Monday Night Football. One of our trading desks was connected with a broker at One WTC. All of a sudden, the line just went dead and the screens went blank. Then we saw the crash on TV and I knew it was no accident - that plane had hit the building dead centre. Another desk in the room was on with Two WTC - and it happened all over again. It was such a shock - one minute ago someone was talking and then there was dead silence. We evacuated our building soon afterwards - Rockefeller Centre might have been another potential target, no one knew. I went into St. Patrick's Cathedral. When I came out, I looked down 5th Avenue towards the Trade Centre and watch ed the second tower collapse.

Robert Lockwood, The Bank of Nora-Scotia - ScotiaMocotta

At first, I heard a huge explosion and I thought a bomb had gone off in the WTC - it reminded me of what had happened in 1993. Our offices are on Liberty Plaza, immediately east of the towers, so I didn't have a view of the north tower and I couldn't see the plane. After the impact, there was a power surge. The wind was blowing towards our building, pushing across a shower of bits of paper, insulation, debris. Most of the people here were out in five minutes. There were thousands of people on the street. It seemed like everyone was frozen to the spot, staring up at the fire overhead. I just wanted to get away. I thought it would be good to head for Greenwich Village - no tall buildings, no nearby bridges or tunnels - no targets. The second plane hit while I was on the street, so the explosion was even louder this time. By now, I was on the north side of the towers so again, I didn't see the plane hit - there was just a huge fireball right overhead, then smoke began to pour out. It looked like an old Schwarzenegger movie set, not real, with the black and white smoke pouring out against that dark blue sky. But then I heard screams and saw bodies falling and that was very real. I got to Christopher Street and was able to catch a train to New Jersey. By the time I got out at Hoboken, the towers had fallen. Looking towards downtown Manhattan, so much smoke and dust was pouring out that it looked as though a volcano had erupted.

Rose Stoffo, Prudential-Bache

I came in at 5 am - just a typical day. At first, we thought a bomb had hit until we saw what happened on TV. We were watching the screen when the second plane made a U-turn and hit and that's when we decided to evacuate. We transferred everything over to London office and got ready to leave, Everything seemed to lake longer than it should. I was still in the office when the first tower fell I but I was out on the street when the second one went down - it just collapsed like a house of cards. I live uptown on 94th Street and Columbus Avenue and I ended up walking nearly all the way home - there wasn't really any other way to get around, though some people caught a ride in the back of empty delivery trucks.

In the Aftermath

The after-effects of the attack rippled across, all sectors of the US and UK market. In the hours. days and weeks following the attacks, the market struggled to come to terms with the event from a logistical and personal perspective.

Matthew Schwab, Barclays London

My mother's company has an office in the WTC and I wasn't sure where she was working that day, and my sister and brother-in-law work for Morgan Stanley. I had to make sure they were OK before I did anything else. At first, the market just stopped, but after a while, instincts took over. This is what you do - what you do every day - and you can do it almost on autopilot. There was a lull after the first plane hit, but after the second one, the market really roared - it shot up $20 in a straight line. Initially, it was basically being marked up, but then business started to flow in. We were quite busy until after the fixing.

Mike Devaney

In the days immediately following the attack, the priority at Comex was to get up and running again, despite our proximity to Ground Zero. We set up emergency headquarters in a hotel in midtown and were assigned a police boat to get back to the Exchange. We had back-up generators for power and we tried to re-create the trading floor so we could begin inputting the trades from that morning. Some traders had dropped their cards when we evacuated, others had taken them with them - we needed to get hold of as many as possible. On the Saturday after the attacks, about 60 brokers, clerks and staff came in. It was a lot of work, but we were able to resolve 90-95% of the trades.

Bob Arcand, Fleet Precious Metals

As a supplier to the jewellery trade, our biggest problem was getting metal to customers without having the usual means of transport - no air courier, and lots of difficulties getting around Manhattan. Truck routes kept changing because roads were blocked off. We couldn't even be sure when vaults would be open because of frequent evacuations. There had already been a slowdown in the jewellery sector before the attacks and since then, the same pattern has continued. Taking seasonality into account, it's running lower than last year. What might help demand stay steady through the season is the deep discounting already going on in retail stores and the recent improvement in consumer confidence.

Rand LeShay, A-Mark Precious Metals Inc

Consumer interest in coins did jump sharply, but sourcing them posed no difficulties for us. All last year and into this year, the market has been working through the overhang from the massive post -Y2K dishoarding. Figures from the US Mint for sales of one -ounce gold Eagles speak for themselves. In August, 5,000 were sold. In September, the total jumped to 53,500 - a ten-fold increase, but still only roughly half the monthly average seen throughout 1999 in the run-up to Y2K fears. The Mint couldn't turn coins out fast enough back then.

The Implications for the Market

When the developer who holds the lease on the 'World Trade Centre announced recently that he intends to rebuild at the site, he estimated that it would take five or six years to construct new towers - towers half as high as the original ones.

The equity markets and the US dollar took considerably less time to rebuild, and they've gone well past the halfway mark - they are now close to or above pre-11th levels. "Although newspapers are full of stories about panicked Americans, the reaction of the US investing public appears to have been more measured", says John Reade, an analyst at UBS Warburg.

Investors have had some help in getting their confidence restored. "The Federal Reserve has pumped in money - relative to the demand for it - almost as fast as OPEC has oil," Mitsui's Andy Smith points out. Auto manufacturers have extended zero -interest car deals through January 2002. So it's perhaps not surprising that gold has retraced its steps. "Accusing it of underperformance after September 11 is assassinating the messenger", says Smith.

There has been some surprise - and disappointment - that gold never managed more than a $20 rally. Rand LeShay worries that the small investors need to see more follow-through: "Without that, it becomes harder and harder to attract them ."

But UBS Warburg's Reade points out that Comex-trading speculators were already net long going into the 11th because of falling interest rates and concerns that the US dollar might weaken. Had they been short, the moves in gold would quite likely have been more volatile.

Kamal Naqvi of Macquarie Bank, notes that the market has been in a five- to ten-year bear run. "Expectations from some were simply too high. It was always going to take time and further justification to encourage investors back to gold and this did not occur."

But Maybe It's Not Over

There are still outstanding issues. On the geopolitical front, Naqvi points out that the real threat is that the preparators didn't appear to operate from a centrally controlled organisation but from a series of tight-knit cells. Osama Bin Laden is one man, and his capture would not eliminate the threat of another attack.

Simon Weeks at the Bank of Nova Scotia - ScotiaMocatta feels that on the economic front, the worst may be yet to come. "The depth and persistence of the slowdown in the US has yet to be digested. The Fed can't carry on propping up the markets forever." In fact, Greenspan himself has admitted, "Nobody has the capacity to fathom fully how the effects of the tragedy of September 11 will play out in our economy. "

Naqvi sees the importance of economic developments still unfolding: "I don't think people buy gold merely because a disaster happens, but due to the economic considerations that may flow from such an event. If economic conditions don't improve quickly, equity markets may well have another look at the downside. If faced with a prolonged recession, central banks might decide that some inflation is tolerable - or that it might be good for the dollar to weaken in order to encourage US exports."

Cautious Optimism

Andy Smith's recent conversion from long -term bear to cautious bull has become a talking point in the market. He points out that consolidation amongst bullion banks - which started well before the 11th - may actually benefit potential investors. Having fewer middlemen will tend to widen spreads, thereby discouraging producer hedging, and it reduces the number of available creditworthy counterparts for central bank lending. Gold's almost permanent contango - which tended to discourage investors - would no longer be a sure thing.

And consolidation amongst producers may be positive for the price as well. Non-hedgers Newmont and Franco-Nevada have pledged to buy back Normandy Mining' s hedge book if their bid succeeds. That buying might meet others going the same way. 'Would they meet central bank sales going the other way? Before September 1999, perhaps. Not now, at least not from the main official gold holders.

'Why is it so difficult to buy gold?'

Any optimism in a market more used to pessimism should be tempered with realism. "I think the gold market is surprised to find that there are potential investors out there," commented Barclays' Schwab in a recent FT interview. "I don't think it really knows how to deal with them." Consolidation has also taking been place within banks, limiting their resources to market to individual investors. "So the retail investor might be pre-programmed to buy gold under certain circumstances - but can't!"

Perhaps, suggests Andy Smith, jewellers could step into the breach. "If the man-in-the-street 'gets' the notion of gold as a reputable investment, but the man -behind-the-screen can't or won't, then the business should go to the street. Most people's 'interface' with the gold market in The West is not banks or the Internet, but jewellers. Why shouldn't jewellers offer gold deposit accounts (in joint venture with banks, perhaps) redeemable after a term of years into metal or paper, as the client prefers? Who knows, a 'Tiffany Gold Account' might even become 'cool'?"

In the days following the attack, the LBMA was flooded with calls from individuals looking to buy gold and not knowing how to go about it. Often, they'd already made four or five phone calls and were disappointed to learn that they needed to make at least one more.

"Why is it so difficult to buy gold?" asked one frustrated caller. A question that should be answered - sooner rather than later.