Gold rose right throughout the European session today, picking up $5 per ounce at one point before settling just north of $645 as New York was left to close out Tuesday's trade.

"There's going to be a lot of waiting until the Fed makes a decision [Wednesday]," reckons Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago.

"Unchanged [Dollar interest rates] is no surprise. The world has decided an ease is out of the question. You're going to have possibly a raise from the Fed. That can put a damper on the gold rally."

Analysts at Dresdner Kleinwort agree. "The market now appears to wait for the outcome of the two-day FOMC meeting starting today."

But looking further ahead, Michael Lewis, head of commodities research at Deutsche Bank, reckons that "a low interest rate environment is very constructive for the market...

"So if the Fed is about to embark on rate cuts this year, that should be supportive for gold going forward."

Analysts also cite oil yet again as a key driver for the gold market. "Oil is providing some support for gold," said one US analyst earlier to Bloomberg. "Crude oil remains the dominant fundamental driver for the time being," adds Dresdner.

Yet today's small rise in crude oil futures still leaves petrol prices are 20% down from a year ago. Gold on the other hand now stands 13% higher.

So the inflation-hedge appeal of gold looks to be broader than simply acting as an energy proxy. Indeed, the flood of money and credit pushing all asset prices higher is drawing in far more new gold investment than any putative link to the oil price.

To read more about the impact on gold prices of today's unprecedented increase in global money supply, click here to discover who – really – needs the Fed...