Gold rose by more than $6 as the US opening drew near, before shooting higher again to re-test $660 as Europe closed for business on Thursday.
The metal had weakened dramatically at the European opening, as poorer than expected German manufacturing data sent the Euro sharply lower.
That pulled money put of gold as the US Dollar rallied.
But the European Central Bank – even though it kept rates on hold today, alongside the Bank of England – later hinted at the chance of a rate-rise in the Eurozone next month, regardless of Germany's slowing industrial output.
The Dollar fell back – and gold recovered £330 versus Sterling as well as €500 versus the Euro before rising to fresh highs for the week.
Currency and commodity traders calling BullionVault also cite fresh saber-rattling in Tehran as a reason for gold's sudden and sharp recovery.
"The enemies know any aggression will give way to a wide reaction from Iranian people toward them and their interests in all parts of the world," said Iran's Supreme Leader, Ayatollah Ali Khamenei, earlier today.
He was referring, of course, to the Bush administration in Washington. Tehran defied a UN Security Council deadline of Aug. 31 to halt its uranium enrichment program. The Security Council set a two-month deadline before imposing sanctions in late Dec.
Bad news on oil is also potentially bullish for gold today, with Goldman Sachs setting a new price target for crude of $71 per barrel – up from the current $57.
"We continue to see the prospect for a weakness in the Dollar and we remain positive on the outlook for the oil market," says one European analyst. "All these factors should provide support to gold."
Gold's recent rise towards $660 per ounce has brought heavy physical sales into the market, however.
Scrap gold supplies have "flooded" the Heraeus Holding GmbH refineries in Hong Kong and Germany, reports Bloomberg. Wolfgang Wrzesniok-Rossbach, the company's head of sales and marketing in Hanau, Germany, says physical demand is so weak in comparison that he's having to ship refined gold for storage in London vaults.
Perhaps he should ship the gold directly to China's central bank instead. Rumors persist that it only voted on a panel advising the IMF to sell 400 tonnes of gold last week so that it could diversify its own currency reserves away from the US Dollar and into gold.
Or Herr Wrzesniok-Rossbach could ship his gold to Tokyo. "There has been an increasing interest to hold bullion from the general public in Japan," said one Japanese metals analyst this morning.
"Such long positions held by the general public reached perhaps the highest in 20 years."
To read more about what Tokyo's gold price is telling us, click here and read on...