Gold leapt higher in Europe's morning session on Tuesday, breaking back above $657 per ounce only to pull back on weak trade in the US.

Even so, "the market has been able to consolidate around $650 which should be a solid base," reckons Frederic Panizzutti, analyst with MKS Finance in Germany.

"The general positive feeling for commodities over the last couple of days and the ongoing dollar weakness are very supportive for gold...

"We will not be surprised if further inflow of fresh investment into gold happens over the coming few days. The longer we can hold the $650, the stronger the base will be."

Today's action was repeated in all major currencies. British investors gained 1% to £334 before gold dropped back to £332. Against the Euro, gold rose 1.2% to break €507.50 and record a new 7-month high. It then retreated to €504, higher for the day but sharply off its highs.

"People will hold off selling gold when they see copper and other commodity prices higher,'' says a Swiss gold trader.

"We are seeing good demand out of Asia," he adds, referring to the upcoming Chinese New Year festival.

Copper today halted its 15% plunge since Jan.1. Crude oil futures have also climbed.
But gold's current bull run – which started in 2001 for Dollar investors – has come thanks to the metal's own particular appeal.

"The driving force behind the bull run for gold has been the increase in activity from the investment community," said Natexis in a report yesterday. It forecasts an average gold price of $670 per ounce in 2007 – up from $603 last year – rising to $710 in 2008.

For more detailed analysis – plus the outlook for gold mining supply and central bank sales in 2007 – click here and read on...