Gold shot higher at the New York open, breaking $650 per ounce and then continuing to rise against all major currencies.

"As everyone knows, [the] gold market is waiting for the FOMC decision," said Ned Schmidt of the Value View Gold Report yesterday. But with the Fed decision on Dollar interest rates still 5 hours away, traders stopped waiting and piled into gold.

"People are expecting the Dollar to weaken," said one trader in New York to Bloomberg earlier.

Yet if the Fed doesn't raise rates today that would suggest a rally in gold versus the Dollar only. Today's sharp hike in gold prices has also come against Sterling (above £334 per ounce) and the Euro (back above 500 Euros per ounce).

Meantime, the World Gold Council reported earlier today that China's physical gold demand in 2006 held firm at 240 tonnes, despite a sharp rise in gold prices.

Physical demand from Chinese jewellers was slow this morning according to dealer comments, but they are expected to increase their stocks ahead of the Lunar New Year celebrations next month, traditionally a busy season for investment jewellery demand.

News from Mumbai today also says that India is now due the first of three exchange-traded gold funds (ETFs) in February, one month earlier than previously planned. The Economic Times reports that Benchmark will trump Kotak's gold ETF offering, scheduled for March.

These gold ETFs will give investors in India - the world's largest single gold market - the chance to take profits on rising gold prices much easier than at present. But it's unlikelt to actually dent India's bullish love of the metal for investment and wealth protection.

And alongside the growing investment demand for gold, both in Asia and the West, gold mining supplies are slowing in the face of environmental protests, rising mining costs and shrinking reserves in the ground.

For a full analysis of why the international gold price could hit a serious squeeze early in 2007, click here for BullionVault's latest in-depth research report...