Gold slipped in early European trade Monday, dipping beneath $645 as it fell against all major currencies.

The consensus of professional investors remains bullish, however. Twenty-two out of 42 traders and analysts surveyed worldwide by Bloomberg just before the weekend advised buying gold. Twelve said to sell, and eight were neutral.

Oil and the US Dollar continue to loom large in most analysis. Crude oil has recovered from its low beneath $50 to more than $54 per barrel thanks to a cold snap in Europe and the north-eastern United States.

Crude oil prices have been rising so far today on further cold forecasts for the US.

"Also this week, the US Federal Reserve will announce its latest decision on Dollar interest rates at 19:15 GMT Wednesday. Until then, reckons one gold dealer in Hong Kong, "gold continues to drift within $640 to $650...

"It possibly will remain within the range ahead of the [US] Fed meeting. There's no clear direction as for today."

But outside influences such as Dollar policy and rising oil prices may not affect the gold price as much as its own demand and supply dynamics.

"Mine production's been falling for some time,'' noted Jonathan Barratt, managing director at Commodity Broking Services in Sydney, earlier today.

"At the end of 2006, we actually only had a very minor surplus in terms of demand and supply. This year that might become more crucial when we don't have enough supply to meet the new demand and production's falling...

"That should say gold trades by itself and continues to trend higher."

On a technical reading of the gold chart, meantime, last week's break above $645 put a stop to the 9-month downtrend beginning in July. One trader we spoke to reports that some very big sellers of both gold and silver who quit the market three weeks ago were forced to buy and cover their positions late last week.

He noted rumors in London that a Chinese trader has been buying gold heavily, too. And both the Russian and Chinese central banks were also suspected of selling the US Dollar aggressively on Friday, albeit through their usual "hidden" channels of using private banks to disguise their trading.

"I am looking for an initial move to test $675," our contact advised. Gold first has to hold $645 however – a crucial level on the charts – and then break and hold above $650, the level it failed to secure last Thursday.

Short-term, all eyes will be on the price of crude oil and the US Fed meeting Wednesday. But looking further ahead, we believe, the case for gold remains unchanged.

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