Thus, when these banks along with the Bank of England (BoE), Bank of Sweden and Bank of Switzerland announced on September 26 their unilateral moratorium to freeze sale of gold to 400 tonnes a year for the next five years, all hell broke loose. Chains taken off, gold prices went into an overdrive and zoomed to $327 per ounce briefly in New York on September 28.

Other precious metals followed gold, with silver soaring above 583 US cents per ounce as platinum hit $423 per ounce and palladium $388 per ounce. It was a sweet surprise for Warren Buffett, still saddled with much of his 129 million ounces of silver. But is gold's current bull run a mere flash in the pan?

Analysts marvel at the timing of the moratorium announcement so soon after gold had staged a recovery from $255 per ounce to $270 perounce. Apart from the 400-tonne per year figure, the catchword was that the CBs would limit lending and gold derivatives to current levels, making hedging unattractive. However, ironically, lease rates briefly soared to 10 per cent, making lending attractive.

A major factor in favour of gold is that of the top 12 central bank holdings, only US, Japan, China and Russia are outside the scope of the unilateral announcement. Among these, US has never been tagged as a seller of gold. Both China and Japan are desirous of increasing their reserves.

Russia, with 500 tonnes of gold and tonnes of economic problems, is a prime candidate to sell gold. But it has valued its gold at $300 per ounce and so prices would have to really zoom before it would be tempted. Analysts now expect gold to vacillate between $295 and $315 per ounce. The challenge now is getting past $315 per ounce, before confronting $340 per ounce, and to settle at $350 per ounce. In fact, GFMS (Gold Fields Mineral Services), that earlier predicteda range of $240-$270 per ounce, now claim that gold could scale $400 or even $500 an ounce if the short positions were as rumoured in the markets.

But even as gold prices zoomed, the Asian demand virtually dried up. On the positive side, should gold prices stabilise at higher levels, investors could perceive a higher value for their investments and flock back to gold. And should Asian central banks turn buyers of gold (lead by China, Japan and Korea), Central banks' net sales figure would be much lower. For the producers it could mean their produce is readily sold. In fact, Australian producers are already thinking fresh explorations should gold stabilise at higher levels.

With crude oil near $25 a barrel, the Dow under pressure for the second week running and the dollar distinctly wobbly, the FOMC meeting this Tuesday could provide fresh impetus to gold if Greenspan deems it fit to hike interest rates due to inflationary trends. Last Friday saw gold at $307.50 per ounce and silver at US cents 567.25 perounce (gold and silver, London, Friday prices).

Despite buyers staying away, gold soared in local markets to Rs 4,725 per 10 gms before closing at Rs 4,550. Likewise, .999 silver too ended at Rs 8,400 per kg after it scaled Rs 8,600 per kg. Both the precious metals, gained more than Rs 300 during the week (gold and silver, Mumbai, Friday evening prices).

Meanwhile, the BoE appears to have made a neat pile by shifting from gold to yen, euro and other currencies. However, with gold ruling high and likely to settle much higher than even the May 7 level of $290 per ounce, will the BoE still need to sell its gold?