"In the next 18 months, I think we are going to have really tough times but beyond 18 months, I could put together some cogent reasons for optimism," said Jessica Cross, chair of the Financial Times gold conference in her concluding remarks to the two-day annual forum held in Spain.

Cross, director of Crosswords Research and Consulting and a self-acknowledged gold bear, said that despite an array of depressing factors facing gold, signs were that things might have reached their base."I have come away from the conference more optimistic than when I came in," she said, adding that clarity on European countries' plans for managing gold within the new European Central Bank system would be crucial.

Cross said resolution of the ECB issue could "herald a sea change in thefundamentals of the market."

Rudolf Trink, head of treasury in the Austrian Central Bank's strategy division, said that while euro-zone banks might sell off some gold in time, they would not do so now in case they damaged the new bank's credibility.``That could be a decision which might come up in some years time. For the time being, the European Central Bank has to build a track record, presenting itself as a symbol of sound financial management,' he told Reuters after his speech.

"Sales now would definitely not add to its credibility," he said.

Luis Linde, director general of the Bank of Spain's foreign department, told delegates it was very likely that gold will be among the assets that the national central banks shall transfer to the European Central Bank.

The question of how much gold the new ECB will hold has dogged the gold market for months, opening the door for increased mine hedging and speculative short selling of gold, and falling spot prices, in anticipation of more supplies coming tomarket from central banks' vaults.

Linde said that more important than the question of sales was central banks' increasing tendency to lend out their gold for a return, adding to market liquidity.

"I think this is the tendency. In Europe, most of the national central banks associated with the ECB are now considering this gold management through swaps or through deposits," he said.

"I think the normal thing would be, perhaps not immediately, that the ECB would consider gold management as a normal thing to do," he added.

Those feeling the pressure in the meantime were likely to be the smaller mining companies and bullion banks themselves.

Peter Lalor, executive chairman and management director of Australia's Sons of Gwalia, said that while mines in his country had managed to cut cash costs to survive US dollar price falls, the smaller ones remained under pressure.

"New mines are unlikely to be able to achieve the high gold prices that the current major producers enjoy,' he said, adding that thequality of resource now required tended to make smaller projects uneconomic.

"The availability of either debt or equity for smaller gold mining or exploration companies in the sector is now highly questionable and the future of these companies must be regarded as poor," he added.

Many miners' poor performance had hit some bullion banks, who arrange project financing and hedging facilities to the industry.

"With fewer financing opportunities, some lenders have exited the business or scaled back operations," said Alexander Mintcheff, managing director of global commodities at The Chase Manhattan Bank.

"What's more, smaller banks that had once engaged in some form of bullion banking have put such activities on hold as they re-examine balance sheet usage and where to invest their limited resources," he said.

Other delegates agreed that despite the problems faced by certain banks and miners, the industry as a whole seemed to be cheering up a little.

Terry Smeeton, former head of Treasury at the Bank ofEngland and a veteran of the annual conferences, said delegates' mood appeared much more upbeat than last year's event in the Czech Republic.