The marketplace has become a quagmire for gold, particularly after the first auction of 25 tonnes of gold by the Bank of England (BoE) on July 6. All efforts seem to push the yellow metal deeper. From $263 to $261 to $258 to $256 and then to $254 per ounce. After a fleeting respite at $255 per ounce, gold was once again on the skids as it tumbled to reside in the $252-$253 per ounce range. And it appears that the end is nowhere in sight.

The yellow metal has more problems on hand if lease rates are any indication. On July 13, they were at a high of 3.9 per cent against just 0.50 per cent before the May 7 announcement by BoE. It is widely believed that high leaserates are a precursor to sale by a central bank. Thus, in tune with past records, markets are abuzz with rumours that yet another central bank has sold gold. However, some analysts opine that lease rates may be tight on account of funds being very short for a longer time.

Further, producer selling has reared its head, particularly in Australia. It seems that whenever gold approaches $255 per ounce, producers nip the rally in the bud. A London-based technical analyst, although not predicting sub-$200 per ounce levels for gold, nevertheless feels that once the $250 per ounce resistance level caves in, gold could slide to $235 per ounce.

Few analysts now believe that with even the Indian marriage season coming to an end, gold could well be in the doldrums, at least till the end of September. Positive news could originate from the US. And the only solace for the yellow metal is that the IMF and Swiss gold sales will take a long time to fructify. But the downside is that till such a time, the `Damocles Sword'will dangle over the precious metal.

A delegation of South African gold miners is in London to convince the BoE and others in the UK to put a halt on future gold auctions. As of now, BoE is firm in its resolve.

Silver, under pressure from low gold prices, also fell on technical selling from near US ¢522 per ounce to be precariously perched closer to the ¢500 per ounce.Friday saw touch a high of $256.40 per ounce on news about a major producer suspending a mine project and a senior IMF official said that IMF would sell gold to other central banks. However, the yellow metal fell after that to be fixed at $255.65 per ounce. Silver recovered marginally to US ¢511 per ounce (gold and silver, London, Friday evening prices). In the domestic markets, the code of conduct invoked by the Election Commission following the announcement of the poll schedule is likely to hit the Gold Deposit Scheme. Forward trading and derivatives in bullion may have to await a new parliament. However, the authorities in power must notethat if India is to make any progress in exports of gold and studded jewellery, all imports should be official. If illegal imports also take place, exports too could follow the same route. The loser would be the exchequer. Thus, any move to increase import duty or derail OGL imports (in order to allow exporters the benefits of SIL premium) is fraught with danger.

Elsewhere, precious metals declined in tune with international trends. Standard gold declined from Rs 4,075 per 10 gms to Rs 4,015 per 10 gms before ending at Rs 4,020 per 10 gms, while .999 silver slumped from Rs 8,030 per kg to Rs 7,870 per kg, only to close at Rs 7,895 per kg (gold and silver, Mumbai, Saturday evening prices).

Meanwhile, as gold slides alarmingly, gold baiting has become the new favourite pastime of all and sundry. In a hurry to bash up the vulnerable yellow metal, what is conveniently forgotten that in the aftermath of the south-east Asian crisis, which threatened to engulf the entire world, it was gold that bailed outIndonesia and South Korea. While tom-tomming about stock markets and the strong US dollar, detractors fail to remember the infamous Black Monday of October 1987. They also overlook the irrefutable fact that the US dollar has the comfort of around 8,000 tonnes of gold at Fort Knox. Just imagine the Indian rupee officially backed by 9,000-13,000 tonnes of gold!