Spot gold prices moved sideways through the first-half of European trade today, bouncing back above $650 per ounce from a dip to $647 just ahead of the US open.

"Importantly, gold has held the $650 area well," said Brandon Lloyd for Mitsui in Sydney earlier.

"If pressure persists on the US Dollar and the gold fundamentals continue to improve then we should see a re-test of the New Year highs."

By the start of European trade today, the Dollar had fallen 1% against the Euro since Thursday.

Now the Dollar has also slipped back against the Yen. The Japanese currency is strengthening once again versus all other actively-traded world currencies.

"Concern over the US subprime mortgage market is rekindling," said Yuji Saito, a senior currency dealer at Societe Generale in Tokyo to Bloomberg.

"Some investors are staying away from riskier assets, causing the unwinding of Yen carry trades." (Click here to read more about the carry-trade now...)

Saito reckons the Yen could rise further still if Japanese investment funds stay away from US Treasury bonds – the only "safe haven" investment to rise sharply during the recent stock market turmoil.

"The fundamentals of the economy are what you have to watch," adds an LA-based fund manager.

"We're going to have slower growth" he says, noting that short-term US interest rates are still higher than longer-dated yields.

The US economy has gone into recession six of the seven times since 1960 that this has happened before.

"The inverted yield curve should not be ignored," says Saumil Parikh, a fund manager at Pimco in California, the world's largest bond fund group.

"The fact that the yield curve is inverted gives us a signal that overnight rates are too high. That's what the yield curve is telling the Fed."

(But could a cut in US rates save the housing market? Click here to read on...)

Back in the gold market, and against Sterling the spot price of gold has moved in a tighter range so far today, opening London at £337 per ounce – the same price it opened Monday.

The Euro price of gold opened Tuesday's session at €494 per ounce, one Euro higher from yesterday's start.

"The market continues to gyrate with equal weighted bulls and bears trying to push the prices in either end's favour," says Pradeep Unni, an analyst at Vision Commodities Services in Dubai.

"It remains to be seen whether last week's steep rally was only a dead-cat bounce."

Gold futures traded in New York managed to hold above $650 per ounce as the US session closed last night.

But Tokyo's benchmark gold contract fell to price gold in Feb. '08 at the equivalent of $658 per ounce today.

"In terms of trading range over the remainder of this week," says David Moore, commodity strategist at the Commonwealth Bank of Australia, "I would expect that [spot gold] would probably be fairly broad.

"It's probably between around $645 an ounce on the bottom side, and maybe around $657 an ounce on the top side."

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