The BoE (Bank of England) also appears to have done likewise. On May 7 it announced its decision to sell 415 tonnes (out of a total reserve of 715 tonnes). Even though the said gold was to be sold from July 6 onwards and in 25-tonne auctions, gold markets have been bleeding since that day. The yellow metal, which was nearing $290 per ounce on May 7, had slumped to $261.20 per ounce on the date of the first auction, saddling BoE with a notional loss of $26 per ounce. And with IMF and Swiss sales (1,300 tonnes) on the anvil in the future, BoE's next auction on September 21 may well see the yellow metal at much lower levels. Did thetom-tommers at the BoE factor in the sharp fall in prices? If not, is the transaction now worth going through?

The BoE sale drew loud protests from gold producers. South Africa's Anglogold, the largest producer, condemned BoE as naive, dangerous and disruptive. WGC chief executive H Fukado spewed venom, "At this price (of $261.20 per ounce) the people of Britain are being short-changed by the chancellor by a staggering $600 million. This is the economics of the madhouse.... It will take 3.5 years at current dollar bond rates of 5% to recoup this loss."

And as gold slipped to the $256-257 per ounce range (lowest since May 1979) discontent was widespread. Reports indicate that 41 per cent of gold mines have their total costs above $258 per ounce. So any prolonged stay at current levels will see many a mine down shutters.

The 5.2 times auction bid for the 25 tonnes first tranche was well short of expectations of some analysts who expected a turnaround with overwhelming response to the auction. Instead,post-auction, gold fell by $5 per ounce on Australian producer selling. However, there are still some optimists, notably the CPM Group from New York which still expects gold demand to shoot up at lower price levels. Some analysts (really gold buffs) look at a 600-tonne buyback to turn the tide.

However, the cruel fact is that funds are now focussed on base metals and commodities. Prices of copper, aluminium and other commodities and metals are now ruling the roost. No longer are copper and aluminium struggling at 5- and 12-year lows. They seem to be zooming ahead. Gold, on the other hand, looks at the $250-per ounce mark with a sense of resignation. Long-term, there is the potent threat of $150 per ounce.

Silver's attempts at surging ahead were hampered by the decline in gold prices. The white metal fell to $¢517 per ounce after touching the $¢531 per ounce on July 1. However, analysts and dealers alike are positive. Friday saw gold holding out at $257.30 per ounce and silver was stationary at ¢521.50 perounce (gold and silver, London, Friday afternoon fixed). Kargil, robust stock markets and the weakening rupee were non-issues for domestic bullion markets. Gold was mainly influenced by the auction sale by BoE.

Standard gold fell sharply from Rs.4,150 per 10 gms to Rs.4,070 per 10 gms only to recover and close at Rs.4,075 per 10 gms. .999 silver's progress too was hampered as it declined from Rs.8,200 per kg to Rs.7,945 per kg on July 7. It closed higher at Rs 8,030 per kg (gold and silver, Mumbai, Friday evening prices).

Meanwhile, at least for the general population in Asia, gold remains the reserve currency. At the height of the Asian crisis, particularly in Indonesia and South Korea, gold came to the rescue and bailed out these ailing economies. Reports now indicate heavy buying from the region as it moves ahead on its recovery path. However, as yet there is no indication of any official stocking by central banks from the region. Even individuals seem to be waiting for prices to fall further beforemaking their move. And as gold looks down the barrel at $150 per ounce, Asian demand seems to be the only saving grace!