Spot gold prices moved above $651 as New York headed towards the close on Wednesday.

For Euro investors the metal touched €495 per ounce. The Sterling price of gold traded up to £337, a three-day high.

"I think the bad time is over," said one Tokyo trader to Reuters earlier today. "Gold prices will come back to $650 and $670 within 10 days to two weeks."

Such bullishness isn't matched by analysts in Europe and the US, however, reports Bloomberg.

"People are expecting a second dip in equities and therefore are not really the biggest friend of gold," says Christoph Eibl, manager of a $1.1 billion fund including gold and platinum at Tiberius Asset Management in Switzerland.

"There's a good chance gold could drop another $20 or $30."

On the foreign exchanges, the Japanese Yen also picked up the trend abandoned yesterday, rising strongly against all 16 of the world's most active currencies.

The Yen has now gained 1.4% versus the Dollar and 2.2% versus the Euro since the equity and bond market sell-off began.

Fresh economic data from Washington this morning also knocked the Dollar.

ADP Employer Services said earlier that US employers added only 57,000 jobs last month, the slowest rate of growth since July 2003.

"Investors in general are thinking that the economy is slowing down and perhaps the risk of recession has increased," says one New York fund manager.

"At the same time, the issue of inflation doesn't seem to want to go away, leading those same investors to conclude that the Fed may not ease [interest rates] in 2007."

What would higher inflation and static Fed rates mean for the gold price? For a surprising take on what drives the bullion market, click here now...

Meantime in South Africa, the Chamber of Mines said today that gold output in the world's largest producer dropped by 7.5% last year, hitting its lowest level since 1922.

Chief economist at the Chamber of Mines, Roger Baxter told MiningMX.com that South African gold miners have raised their capital investment by 64%. That might lead to higher output this year.

But the decline to date – now down by more than half over the last decade – has come thanks to lower ore grades and increased costs.

Reversing this trend could prove tough, a fact spotted by South African gold mining investors.

Measured in Rand, the sector has underperformed the gold price by 25% over the last 18 months, according to a report from J.P. Morgan.

For more on the global outlook for gold mining output, click here now...