The volatile precious metal surprised again on Wednesday by falling quickly from the start of trade in Australia, the first of the new day, by around US$2 an ounce to a low of $286.50/7.50.

However, prices turned around to rise to US$291.50/3.50 by 5.00 pm (0700 GMT) compared with bullion's close in New York at $288.40/0.40 on Tuesday.

Gold's fickleness has some Australian bullion dealers racing to keep up with the market.

``I don't think they really know what to do,'' Keith Goode of Bell Securities, one of Australia's top gold analysts, said of the hedging strategies of Australian gold producers. ``I'd be surprised if people start adding to their positions (with gold) bouncing around all over the place.''

The falling market is good for producers who sold forward when the price was recently high, but bad for those who did not.

``They dance in the street when the price falls because of their hedge positions,'' Goode said of the dominant position of Australian producers.

But gold is far more complicated than this.

Analysts see the UK as being worried about the fate of Commonwealth member country Ghana, whose largest gold producer Ashanti Goldfields Co Ltd has been hit hard through its hedge book position by September's unexpected gold price rise.

Ashanti, whose derivatives book was designed to protect against a fall in the gold price, was plunged into a loss of $570 million when gold reached $325 an ounce. Now it benefits from the falling price.

``In saving Ashanti Gold Mines, it (Britain) saves the Ghanaian economy. It doesn't want Ghana...to fall over, because otherwise it's going to have to finance its recovery,'' Goode said.

This increased pressure on the Bank of England to push the price of gold down, he said.

But the most immediate concern was the expiry of a large number of ``in the money'' over the counter call options later on Wednesday.

Big plays seen in coming New York trades

On Goode's reckoning, 3.8 million ounces of call options, at a gold price of $290.00, fall due for delivery on Wednesday night.

That will require the covering of three million ounces, with only 800,000 ounces presently available in the market, he said.

``A three million ounce shortfall has got to come from somewhere tonight.''

Other analysts said this could account for gold's price partial recovery on Wednesday.

One reason for gold's sharp price fall on Tuesday night was pressure by the Bank of England to get the price below $300.

At $300 an ounce, 5.8 million ounces of ``in the money'' over the counter call options would expire, Goode said.

Senior bullion dealer at Dresdner Kleinwort Benson, Peter Upton agreed with the figures and saw in them a good reason why gold lodged at around $290 ahead of the option expires later on Wednesday.

But is gold's latest price fall a matter for hand wringing, euphoria or simple befuddlement by producers, who at lower prices simply see their put options, which allow them to sell at a particular price, come back into play?

``It's bit of like a catch-22,'' Goode said.

Producers with vulnerable positions would try to reduce their call options, preferring lower gold prices if they followed the classic route of selling calls to pay for puts.

But dancing in the streets?

Ounces of gold would be called from producers only if the price of gold rose. That is why most would prefer lower prices in a continued volatile market, Goode said.

Upton sees ``mixed interest'' in the price fall by producers.

``The ones that have (hedges) in place are over the moon (with the price falling). But there are people out there who held on that little bit too long (before taking out a hedge),'' he said.