The volatility has virtually paralysed the trade. While the Indian traders have lost almost Rs 200-225 crore, Dubai the hub of the comex trade might has lost around five times more than the Indians. If gold test $370 or does not fall below $320, domestic gold trade would face the worst ever crisis, according to insiders.

``The post auction rally which lifted gold to $340 a oz from $255.50 in just one week is probably the worst ever debacle since hunt bubble burst in the 1980. In recent weeks, three firms went bust, while several more are likely to be defaulted soon.

A leading gold importer who had minted gold coin during last World Cup is still short, it is rumoured. He has lost heavily. His counterparts also seems to be in the same boat.

Traders inAhmedabad alone lost almost Rs 50 crore, and that is most conservative estimate, if global prices rallied further, the crisis would deepen'', said an independent analyst.

``The root cause is the Comex trade. The Comex in which one could trade in any commodities or currencies. The trade has been facilitated by local point operators, most of the deals being matched locally, while rest of it were enrouted to Dubai. The Dubai traders must have lost heavily.'' said a senior banker, dealing in the gold import. On the term of anonymity, he said that a leading importer had disputed with his bank which has headquarters in Allahabad.

Ahmedabad- based traders were busy indulging in unauthorised comex trading in the commodity, as odd as nickel, coffee and yen etc. The market is agog with rumours about defaults but no confirmed reports are available, he added.According to market grape wine, the traders of various leading bullion centres like Ahmedabad, Hyderabad, Delhi, and Mumbai were heavily short of goldanticipating the gold price would fall after UK's auction. Most of the traders were unable to cover their positions hoping that market would fall as a technical correction, that did come very late.

Though dust seem to settle as global prices stabilised around $325, the delivery disputes are yet to be settled. In some cases, deliveries are refused, while in other cases delivery is being not given.

Such disputes resulted from the Comex, or from the unfix trade in which deals are struck but prices decided later on. It's a quasi forward trading, said an insider.

Meanwhile wholesale physical trade has been almost paralysed. Having burnt their fingers in the trade, traders are making deals only on cash basis. The good are delivered only after receiving cash only. Cheques are not accepted.Ahmedabad, the bullion hub of the country is passing through a worst ever crisis, since Hunt brothers silver speculation of late seventies. There has never been such a confidence crisis.

The Manek chawk, heart of thetrade has never witnessed such a bad time. The physical trade was already reeling under a sluggish trend as volume reached it's nadir, but recent debacle would be a last nail in its coffin.

As most of the traders have lost the capital beyond their risk appetite, nobody would be able to deal in physical import trade, which needs huge money. It will compel them to go for Comex speculation, an unhealthy vicious circle, Which is not in the interest of the bullion trade,'' said a leading analyst.

Despite the steep rise in the import cost, gold biscuits are being sold at Rs 54,000 per TT bar against import prices of Rs 57,000, a sizable disparity of Rs 3,000. The disparity is a result of surge in the inflow from the household sector.

As the price rose, those who had bought gold through VDIS 97 and March 1993 Gold Bond are selling their hoarding as they are fetching good prices. Rise has also prompted some selling from mortgaged gold ornaments.

Those from the lower middle class, who have borrowed money athigher interest from private financiers are selling their mortgaged ornaments to get rid of the interest burden. At present around 10 kilo gram such gold is coming to the market, said Dilip Choksi, a leading gold dealer.

Technical outlook

The $75 really clearly indicates the end of the 19- year long mega bear market, which started from 1980 when the gold recorded an all- time high of $ 860 an ounce. Since then prices continued to fall, and touched $251.70 in last July. The recent rally is indicates a strong trend reversal.

The market is technically overbought and ripe for technical correction as 14- day RSI is hovering around 80.

Momentum indicators show moderately bearish trend. In the daily charts, 5-3-3 stockists generate sale signal. The metal is likely to poised to jump upward, once the consolidation phase over.

Fundamental factors also seen supportive for the gold. The reduction in the official sector gold sale is the most positive development in the last 10 years.

Rising leaserates, weakness in US dollar and firm crude price also favourable factors. Improvement in the Asian economic growth will also help gold. The market has average demand of nearby 3000 tonnes annually balanced by nearly 2400 tonnes of mining and around 600 tonnes of official dehoarding.Though general sentiment is still bearish, one should be extremely cautious in going short. The luxury of being a contratian could be afforded only by the giants like by George Soros of Quantem fund and Julia Robertson of Tiger fund. Small traders should never fight against the trend. The only thumb rule is - ``Trend is your friend,'', quipped a trader.