“Some bullion dealers are asking buyers of coins and bars to lock-in price today and come two days later as they do not have much inventories,” said Dharmesh Parekh, a partner at R.V. Jewellers in Mumbai.

Nationwide daily sales of jewelry, coins and bars may be about 4 metric tons, compared with normal levels of about 2 tons to 2.5 tons, Rajesh Mehta, chairman of Rajesh Exports Ltd., said yesterday. UBS AG said April 23 that physical-gold flows to India approached the highest since 2008, while Standard Chartered Plc said shipments last week were 20 percent above a previous record.

“Demand has been extraordinary in the past 15 days and sales this April have been much better than last year,” Kamal Gupta, chairman of P.P. Jewellers Ltd., said by phone from Delhi. “Demand may slow from now on as prices have started to rise.”

Eoin Treacy's view Mrs Treacy has also heard stories from China where people have been queuing outside gold dealers to buy gold. There have also been reports that some dealers are issuing notes because they have run out of inventory. Central banks, not least Russia, have also been active in topping up their holdings. The rebound will also have pressured some of the shorts who will have covered as prices rose from a low on the 16 th of $1321 to today's peak of $1485.

On the other side of the equation Total ETF Holdings of gold continue to extend their decline, falling from a peak of 84.637,000 to 73,769,000 ounces between December and yesterday. It is noteworthy that ETF holders who had been an unflappable source of additional demand for 10 years, buying on every dip, now represent a potent source of supply. .

Some of the classic arguments for owning gold are as true today as they were at anytime in the last decade. Interest rates remain at ultra low levels, central banks are deliberately targeting inflation and gold miners are paying more to produce less. However, the fact that a key source of demand has turned into a source of supply is a major challenge for the bullish hypothesis.

Gold has unwound more than half its oversold condition relative to the 200-day MA over the last 10 days. The lower side of the overhead range, in the region of $1540, now represent a potential area of resistance and a sustained move above that area would be required to begin to repair technical damage already sustained.