Gold held onto its New Year gains in the first half of the European session to reach $640 per oz, where it recorded the highest London Fix since Dec.5.

"Gold started with a very positive note and got a weak Dollar as well for the start of the new year, which is encouraging people," said the director of precious metals sales at Dresdner Kleinwort Investment Bank to Reuters.

Today's gains have been muted outside the Dollar and Yen. "[But] if you look at gold in euros, it's at 482 and that's a pretty good performance over the last couple of days," notes Barclays Capital in London. Against Sterling, gold has now recovered all its losses since early December. It's risen 3.5% in the last two weeks.

Trading is slow today, however, with Tokyo and Singapore still closed for the New Year and futures trading at the Comex in New York suspended for the funeral of former US president Gerald Ford. The sharpest gains have come for Dollar and Yen investors, as Sterling and the Euro have continued to rise on the foreign exchange market.

Both the ECB and Bank of England are expected to raise interest rates again soon, either at their policy meetings next week or early in February. US rates have paid better returns since the summer of '06, but speculators have still driven Euros and Sterling higher in anticipation.

Earlier today the Pound hit a new 8-year high against the Japanese Yen. But why swap one paper currency for another, when neither are backed up by anything beyond more promises to pay? Discover the shocking history of paper money and political terror – here...