Potential Sell-Off Is Imminent

BY

Policy makers said the decision to cut the overnight lending rate was based on the ``potential'' that a sell-off in credit markets will slow economic growth. A Commerce Department report today showed U.S. building permits in August dropped to the lowest since 1995.

``Gold and gold shares are the traditional refuges in times of financial trauma,'' J.P. Morgan Securities Inc. analysts said yesterday in a note. ``We continue to feel most portfolios should contain some gold.''

Historical price charts show gold's gains may be limited after four straight
weekly gains. The 14-day relative strength index for gold futures has been above 70 since Sept. 6, a signal that prices may be headed lower. Today, the index rose to 78.

``Gold is going to work for a few weeks around these levels,'' said Zeman of LaSalle. ``Gold can't
make a real sustainable run higher without consolidating.''

Gold futures reached $873 an ounce, the highest ever, in January 1980.

COCY

the index rose to 78