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A vengeful gold has come back from the dead

Section: Daily Dispatches

Dear Friend of GATA and Gold:

You'll enjoy this story from Reuters from a few days
ago, wherein Prudential Bache's Ted Arnold acknowledges
the possibility of an imminent new rise in the gold
price even as he tries to persuade himself that it
wouldn't mean anything and that the price would drop
right back down. Of course I'm biased, but it sounds to
me like whistling past the graveyard, wherein a few new
tombstones are being installed, one engraved quot;Ashanti
Gold, another quot;Cambior,quot; a few others that seem to bear
the names of hedge funds and gold brokers.

Please post this as seems useful.

Gold Anti-Trust Action Committee Inc.

* * *


LONDON, Oct 6 (Reuters) -- Technically driven fund
buying could boost gold to $350 within days,
consolidating a higher trading range for the metal
which will encourage physical sales in time, a minerals
analyst said in a report.

quot;Given the promising technical picture and the number
of technical funds likely to become buyers in coming
days, we would not be at all surprised to see $340 to
even $350 basis spot seen in the next 10 trading
days,quot; Prudential Bache International Minerals
Strategist Ted Arnold said in the report, dated Oct. 5.

quot;Our current feeling about the gold market is that we
are going to settle down into a much higher trading
range,quot; said Arnold, who pegged the range at $290 to
$320 basis spot.

quot;But once the rally stalls, as it will eventually, then
we would expect to see quite heavy disinvestment
selling develop.quot;

Gold surged from the $250s in mid-September, first in
response to unexpectedly robust demand at the Bank of
England's second 25-tonne gold auction and then more
spectacularly after 15 European central banks pledged
on September 26 to limit sales and derivatives activity
during the next five years.

Spot gold hit two-year highs just beneath $340 bid on
Tuesday before retracing to the $320s, consolidating a
move which has seen gold equities thunder higher in

quot;We would be amazed if rallies to much over $340 can be
sustained,quot; Arnold wrote. quot;The big danger is that the
higher one goes above $300, the more and more likely it
becomes that we will see significant disinvestments
selling coming out of India, the Arabian peninsula, and
Asia once the rally has stalled.quot;

As the dust settled from last week's rapid rally, some
bullion market participants in the banking, mining,
investment, and fabricating sectors were beginning to
count the cost of having been resolutely bearish on
gold's prospects.

Arnold said funds had been short an estimated 40
million ounces of gold before central bankers'

quot;Covering this in has, we understand, gutted several
very big funds. It also savaged a number of bullion

quot;One well-known bullion bank is thought to have lost
between $30 million and $50 million between its
worldwide book and its option writing,quot; he added.

quot;But delirious as the gold bulls must be, it is worth
pointing out the problem of the grossly overweighted
gold portfolios of the European central banks has not
gone away. The moratorium is no more than a reprieve...
we doubt if the ranks of the 15 will hold for a full
five years,quot; Arnold said.