Gold rose all through today's Asian session, gaining more than $4 from Monday's late sell-off in New York to regain $665 per ounce by the opening in London.
Versus Sterling gold regained £342 per ounce. It broke back above €512 versus the Euro.
The rally came despite falling oil and copper prices – proving yet again that gold has now decoupled from the broader fortunes of the commodity markets.
Against the Canadian Dollar, gold is now trading at its highest level since mid-May, back when de-hedging by the world's leading gold miners – plus heavy jewelry demand from India – drove prices to a 26-year high against all major currencies.
"What we saw [yesterday] was a classic bout of profit taking, which ended the run," one dealer said earlier.
Strength in the US Dollar late Monday also helped push gold lower from the 7-month highs hit earlier in the day.
But traders report Dollar selling in Tokyo today after Japan returned to work from its 3-day weekend. Japanese investors may also be buying Yen, according to Reuters, ahead of maturing foreign bonds and coupon payments this week.
The US Treasury will issue $27 billion of coupons on Thursday, which will also see Japanese fourth-quarter growth data.
A poll of economists for Reuters says they expect annualized growth of 3.8% between Oct-Dec., up from 0.8% in the third quarter.
Weaker growth data would mean the Bank of Japan's long-awaited interest-rate rise will be delayed again. That could add to selling pressure on the Yen.
And stronger data? "I am personally skeptical [however] as to whether the outcome of these events could kill off the carry trade," says Takehiro Sato, economist at Morgan Stanley. (To learn more about the Yen carry-trade, click here and read on...)
Elsewhere in the currency markets, Sterling fell to a one-month low of $1.9438 on Monday, driven lower by weaker than expected Producer Price inflation data.
The PPI fell 2.0% month-on-month in Jan., the first pullback in 3 years. That cast doubts on the Bank of England raising UK rates again soon.
Today's Consumer Price inflation data for Jan. – just released – now puts CPI at 2.7% year-on-year, down from Dec's record 3.0%.
The CPI was eased by falling energy prices according to the government's statisticians. But the old Retail Price Index is now running at 3.5% – down from 3.8%, but still showing price inflation running stronger than at any time since the early '90s.
Back then, UK interest rates were above 10%. Now they're just 5.25%.
"Now that we've had the February interest rate meeting from the Bank of England out of the way," says Paul Robson, currency strategist RBS Financial Markets, "the scope for quicker than expected tightening of policy in the UK is probably a little bit less than it was...
"People are thinking that it's a good time to book some profits on their long Sterling positions."
Big data due in the US as well this week – including retail sales tomorrow, initial jobless claims plus import-export prices on Thursday, and Producer Price inflation alongside new housing starts on Friday.
What's more, Fed chairman Ben Bernanke begins two days of testimony to the Senate Banking Committee today, revealing how he sees the US economy and future interest-rate moves.
"The market is expecting a more hawkish tone from Federal Reserve Chairman Ben Bernanke, opening the door to monetary tightening," said Alan Gayle, senior investment strategist at Trusco Capital Management, in Richmond, Va., yesterday.
Stronger US rates would be bad news for gold – or so the thinking goes. But who need the Fed, really, to tell them which way the wind blows?
To read more about the Fed's signal uselessness, click here now...