Also, for the past couple of years the prices of Chinese assets and gold-related assets have been going up. So, what if the two concepts are combined, into, say, Chinese gold mines? It sounded good when I heard a Chinese gold mine pitch at the end of last month.

It may actually turn out to be good in the real world, as distinct from the world of mining promoters. There are high grade, low-cost Chinese properties, although they tend to be small compared with Russian mines. Sometimes even mine promoters can be on to a good thing.

However, while they are probably right that there are good prospects for low-cost gold in China, Russia and elsewhere, they are probably making a mistake about how to finance its development. I think they are selling too many shares and not hedging enough of their future gold production with short sales.

I have been around people in the gold business for more than 25 years, having been attracted to it about the time it crashed from its spectacular peak at the end of 1979 and the beginning of 1980. The only gold people who survived the drought in the business between 1980 and the beginning of this decade were the faith-based bulls and the calculating hedgers. The hedgers survived on the proceeds of short sales; the bulls survived on hope.

For the past couple of years the bulls have been in the ascendancy. That does not only mean the price has been rising - so they've made some money for once on call options and leveraged stocks - they have also made it an article of faith that the managers of publicly traded gold companies must reduce their hedging books in the face of rising prices. They believed for a long time the gold price was kept repressed in part by miners selling the metal short.

Throughout the 1980s and 1990s, miners who sold some of their production in the forward, futures, or options markets maintained they were simply being prudent. The goldbugs argued they were giving up the speculative potential that was the real reason for owning gold shares. They didn't want a steady income stream; they wanted the untold riches of the East, even if they had to wait for it.

With the revival of the gold price, which at around $430 last week was at a 15-year high, the bulls effected a purge of the mining company managements. Managers who believed hedging was a useful tactic were fired or forced to recant with public confessions of error in the style of the Cultural Revolution.

The result is that even though the price of gold is way up, the demand for gold loans and the price of borrowing it has crashed to microscopic levels. You can borrow gold for 12 basis points over one year. That's right, 12/100 of 1 per cent. For three years you pay 75 basis points, or three-quarters of 1 per cent a year, and for five-year money you pay 1.3 per cent annually. If you are a mine, you can borrow that gold, turn around and sell it on the spot market at today's nice prices (which in many cases are more than double the cash costs of production), and pay the gold loan back out of your production. Since you borrow in gold and then pay back in gold, you aren't taking any risk of loss on price fluctuations.

No other industry on earth can get money that cheap. But that's not good enough for the goldbugs. They don't have their eyes on that low cost of capital. They don't concede that the price of gold could decline again. They believe that when that borrowed gold is paid back, it won't be at $430 an ounce, but at hundreds of dollars higher. The dollars, euros or whatever that could be borrowed now will be inflated into worthlessness.

Inflation, however, is still low in the leading currency areas. And if, or rather, when the Chinese investment boom bursts, won't that take down the industrial commodities prices that are part of the rationale for the gold price rise? Then the gold borrowers could pay back low interest loans with cheaper gold.

Yet when I asked the chief executive of a Chinese gold company if he would consider selling some of his production forward to finance his mine's construction, he recoiled in horror.

"I think these guys are too resistant to hedging," says one of the Chinese mine's investors. "They ought to sell maybe 20 per cent or 30 per cent of their production."

For investors who pride themselves on contrarianism, the goldbugs are making financing decisions on the basis of emotion and herd instinct.