Gold bugs bitten again

Gold bars: An investment that has difficulties holding its value

The price of gold spiked earlier this week, only to collapse again... so what is happening, asks the BBC's Rodney Smith.

When the gold price spiked at $297 an ounce in intra-day trading on Thursday, the gold bugs watched for the inevitable - and they didn't have long to wait.

Big New York investment banks were swiftly reported to be selling - ostensibly, say the gold fanatics, to keep the price depressed and protect the banks.

Gold bugs believe that banks are afraid of being swept up in the stampede of hedging failures if the gold price did recover strongly.

Then Vladimir Putin was reported saying he expected to sell gold to help flood victims in Eastern Siberia.

Ah, so that was the reason gold fell so fast from its near $300 peak this year. Mr Putin's alleged remarks were widely reported.

Only it turns out that he did not say he planned to sell gold, that he was misrepresented.

Instead, the Russian central bank confirms World Gold Council reports that it is a net buyer of gold.

It's also believed to be sticking to an International Monetary Fund agreement to limit gold sales.

So the plot thickens.

As soon as the gold price moves higher, the big banks hit it hard enough - and without any help from the Russians or anyone else - to knock it firmly back.

Derivatives market professionals in the United States report that the big brokers are selling the forward August contracts because they are scared they will be left exposed on their June contracts.

If the deadpan bankers who poo-poo all of this are correct, that will all be that, and the gold price will hang around the $260 to $270 range.

If they are not, and the gold bugs know as much as they say they do, the gold market could be in for very interesting time as short gold positions are uncovered, shorts rush to buy gold...

And the price? Well that's anyone's guess.

Or anyone's bet?