Despite the selling and resultant fall in prices to $318.25 per ounce on October 6, gold has recovered to the $322-324 per ounce region. For the last two weeks, it has invariably closed higher on Friday.

More pertinently, this happened at a time when the Dow recovered lost ground, the dollar strengthened against the yen, oil prices went off the boil and the Fed left interest rates alone. Now, with a strong support level at $315 per ounce, gold looks set to fly again.

Lending buoyancy is the feedback from some dealers that the short-covering rally is far from over. They believe that the short positions are much larger, nearer 6,000 tonnes, than what was anticipated earlier. Theypredict that gold could sprout wings and fly across the $340 per ounce mark.

Further, they aver, the $370 per ounce mark was not beyond the realms of possibility. Analysts also point out that should US funds really move into gold, gold could zoom away.

But all was not rosy for the yellow metal. Japan's finance minister put a spoke in the wheel when he said that Japan was neither an aggressive seller nor holder of gold. He further added that holding gold as reserves did not help Japan. This saw gold stumble towards $318 per ounce before recovering.

Also the Russian Central bank changed its policy of fixing gold prices for buying and selling and there were indications that the duty curbs on exports, in place since August 1998, would be removed, thus paving the way for export of gold.

Ghana's Ashanti gold mines had no peace of mind. Having hedged about 80 per cent of the current year's production on declining prices, Ashanti had a nightmare, trying to ward off banks asking for margins and also attemptingto sell of its stake to potential buyers.

Both platinum, in the high $420s per ounce, and palladium, near $390 per ounce, have piggy-backed on gold and look at a further rally. However, silver has not been very active and the magnitude of its rise is not in tune with gold. Experts believe that once silver rises and scales higher levels, gold would be able to stabilise as well.

Gold was traded at $323.25 per ounce and silver at US cents 555.25 per ounce (gold and silver, London, Friday afternoon fixed). The domestic markets now await the festival and marriage season to find out if buyers will return at higher levels. Some even fear a repeat of the 1980 scenario when disproportionate rise in international prices vis-a-vis local prices saw gold being smuggled out of the country. Elsewhere, standard gold touched a peak level of Rs 4,900 per 10 gm, intra-day, before closing the week at Rs 4,785 per 10 gms. Silver .999, scaled Rs 8,540 per kg before closing at Rs 8,445 per kg (gold and silver, Mumbai, Saturdayevening prices).

Meanwhile, reports from all quarters indicate that gold bears all over the world have been badly scalded as gold surged from $255 per ounce to well over $300 per ounce in a very short period of time.

In India, importers who bought gold on open fix (when gold was at $255 per ounce) were said to have suffered huge losses as Indian prices moved up from Rs 46,000 per 10 tola tt bar to over Rs 57,000. Even Dubai dealers were believed to have taken a beating. The speculators, among those hit by the sudden rise, had to take delivery. They in turn sold off their goods even at a discount of around Rs 3,000, thus hitting genuine dealers as well.

Market watchers now fear that the unscrupulous dealers would be tempted to tamper with the quality of gold bars. This would move down the pipeline and on to the buyers.

Thus, they argue that it is imperative for bullion reforms to move on and the ultimate goal should be to set up a bullion exchange. Will the authorities take note and act quickly?