City: All that glitters

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The Independent Online
PS The Sunday Times surely didn't have me in mind when it wrote in last week's issue: 'The Jeremiahs who tried to dismiss gold's recent surge as a speculative bubble are looking pretty sick this weekend.' I've long been cautious about the gold market but never an outright bear. It's just that I can't foresee the price ever again reaching the dizzy heights of dollars 800-plus an ounce once achieved in the early 1980s, or anywhere near it; many gold bugs did and still do.

To the uninitiated, the gold market has always been a treacherous one - a market, moreover, that is highly susceptible to the manipulative techniques of a small number of professional players. The recent run in the price to more than dollars 400 an ounce was a largely speculative phenomenon, helped by what looked like a carefully orchestrated campaign by George Soros and Sir James Goldsmith to ramp the price in their own interests. At the end of last week, the bubble finally burst and the price tumbled dramatically, punctured by reports of Chinese central bank selling. I've been unable to establish whether the bank actually was a seller, but it's evidence of the fragility of this market that the merest hint of central bank selling can send the price plummeting. I suspect the gold price is going to find it extremely difficult to hold levels at much above dollars 400 an ounce.