Gold rose sharply just before the US open on Friday but fell back to close the week in London below $650 per ounce.

"The mood of the market has shifted down in the short-
term," reckons one San Diego analyst. But the metal still closed London trade higher for the week.

"Long-term sentiment remains unchanged," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, earlier today.

"Gold's in a bullish mood."

The technical analysts at Standard Bank agree. "The longer term outlook still favours a move higher," they write.

"The metal should target $670 and above."

Against the other major currencies, gold has also reclaimed its level of this time last month against the British Pound after Sterling was knocked lower Friday morning by poor manufacturing data thanks to higher Bank of England interest rates.

Only the Japanese Yen now stands higher against gold than it did after the first week of Feb.

The most-active Japanese gold futures contract closed higher for the second day running at the Tocom today. But trading at the equivalent of nearly $680 per ounce, gold for delivery in Feb. '08 remained almost one-tenth off its tip of Feb. 26th – the day stocks, bonds and gold all fell out of bed together in Shanghai.

(What caused the sudden attack of Chinfluenza? Read more here...)

In the securities market, US stocks rose on the US jobs data. European equities also jumped, recovering from a 0.3% dip mid-morning.

US Treasury bond prices, however, headed lower for the week, driven down by Friday's intimation that Dollar interest rates aren't slowing the US economy.

"US Treasuries at these levels are starting to look expensive," reckons Su-Lin Ong, senior economist at RBC Capital Markets in Sydney.

"They've discounted a lot of bad news."

No bad news for the bubble in asset-backed bonds, however.

Banco Santander has announced it wants to float €2 billion of mortgage-backed bonds. UK lender Kensington, which specializes in low-credit score borrowers, is going to raise £800 million by selling bonds subprime MBS.

And Paragon Group, the buy-to-let mortgage group, is floating £1.5 billion of its mortgages.

It's even got a new division, Paragon Mortgages No.14 Plc, specially set up to issue the debt and buy the mortgages.

But the subprime bubble has already burst in the US. Can Europe be far behind?

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