Gold traded at a steady $645 right throughout the European session today, closing London right where it started.

By 13:00 in New York, the metal had ranged between $642 and $646 per ounce – its quietest week-day since Feb. 22nd.

"Generally people are drained but I think starting to feel optimistic for higher prices," said one bullion trader to Reuters earlier.

"We really need to see some good sideways trade to give the market a breather as price action has been fierce over the past two weeks."

Today also saw European stocks rise 1% on average, as government bond prices dipped and traders across the world heaved a sigh of relief after the chaos starting last Tuesday.

The gains in gold began overnight in Asia, picking up below the key support identified by many technical analysts at $635 per ounce.

Not coincidentally, the metal rose as the Yen suffered its worst day in 17 months.

"It seems everybody who wanted to get out of gold has gotten out," reckons Jeremy Charles, head of precious metals in London for HSBC.

"I think the downside has basically been done."

But fears that the global carry-trade in cheap Japanese Yen could spark further madness in the markets still persist.

"All liquidity starts in Japan, the world's largest creditor country," notes Jesper Koll, chief economist for Japan at Merrill Lynch & Co.

"When rates go up here, rates go up everywhere." (Click here to read more...)

Back in the gold market, and on the supply front, Gordon J. Bogden – managing director and head of the mining group at National Bank Financial in Canada – said Monday that a "shortage of decent projects" plus a lack of mid-cap gold stocks could force the major mining companies to diversify into other metals.

Speaking at the Prospectors and Developers Association Conference, Bogden cited GoldCorp's 46% holding of non-gold assets as the result of the gold miners' short-termist approach.

The gold industry "shot itself in the foot" by failing to spend enough money on exploration. And after 2009, he warned, the global pipeline of gold projects begins to dwindle.

That's why "marginal assets are being dusted off," says Bogden.

For more on the supply and demand outlook for gold in 2007, click here for a full report – free – now...