Gloom infects gold bugs. It’s enough to make your average gold-bug head for the Montana bunker, load the AK-47, close the hatch and count cans of baked beans. Gold has gone bonkers. That’s not bonkers as in soaring, but bonkers as in falling -- a succession of five-year lows late last week, yesterday and overnight. The metal is now at levels last seen in the tail end of the GFC, back under the US$1100 level. That’s down 14.5% since the start of this year, and 41% lower than its 2011 peak of more than US$1920 an ounce. A big sale in the Shanghai gold market was responsible for yesterday’s slide, but that was on top of gold bug scepticism about the real level of Chinese gold holdings -- 1658 tonnes as at the end of June, up more than 600 tonnes since 2009. Some gold bugs reckon that’s too low, so the sale of around 5 tonnes of gold in Shanghai was enough to spark a mini-slump and raise questions about those fickle Chinese. The top guess was that a big investor had been forced to sell gold to pay for sharemarket debts. -- Glenn Dyer

China’s ploy. But the Financial Times pointed out the big slump in gold prices could be due to another reason -- a concerted attempt by Chinese hedge funds to try to drive down the price of gold in a way that one fund, the aptly named Shanghai Chaos, drove down the price of copper in a bear attack in Shanghai earlier in the year. That caused copper prices to plunge to a six-year low. Yesterday, gold fell to lows not seen since early 2010 as a result of mystery selling in China. The FT reported that around 11.30am Sydney time yesterday, “there was an unusual spike in volumes on Comex, the US precious metals exchange, where 7600 lots of the August 2015 futures contract -- with a nominal value of almost $860 million. The selling was almost instantly mirrored more than 7000 miles away on the Shanghai Gold Exchange, where five physical tonnes of the metal, worth about $160m, was sold in the space of just two minutes. Five tonnes is nearly a fifth of average daily turnover on the exchange.” Both the selling in copper and gold occurred in Asian trading, when most European and US traders were sleeping. Gold prices also fell elsewhere in China, giving the impression of a concerted, linked attack to drive down the price of the metal, which in turn fed on the weakness from last week. Gold-bugs used to think China was the smartest kid on the block when it came to their beloved metal -- they claimed it was a big buyer in recent years, the only supporter when central banks and others are selling the metal (although Russia has been a big buyer in recent years). But the new figure of 1658 tonnes was much smaller than the bugs had been projecting -- and then yesterday’s bear attack on the metal. Now our gold-bugs have nowhere to turn to, except Russia, or their bunkers and beans. -- Glenn Dyer