Spot gold prices traded up to $649 as the US opened today, before pulling back to $646 per ounce just after the London close.

All told, however, gold stood more than 1% above the low hit on Wednesday, buoyed by a rally in global equity prices.

Asia-Pacific stocks closed more than 1% higher on average this morning. The Nikkei 225 in Tokyo added 1.5%.

"The lack of confidence in the equity sell-offs became evident when the Dow regained its lost ground to finish 0.48% in the black," as Brandon Lloyd puts it for Mitsui.

"[In gold] there was a sense of deja vu as everyone was caught short, prompting the rally back to this morning's $643-$644 area."

Gold's positive correlation with equity prices, in short, continues to grow. (Click here for more on this relationship between bullion and stocks...)

But "gold is likely to regain its lustre once investors and traders realize the slide was a poor cousin of a spillover effect of equity markets and that gold's fundamentals remain very much intact," said Pradeep Unni, an analyst at Vision Commodities Services in Dubai, earlier today.

"Under the current conditions of global financial market liquidity crunch, however, such a turnaround would take significant time to bear fruit."

In the meantime, gold bullion investors may also expect further long-term gains thanks to today's US inflation data.

Higher energy costs, said the Labor Department just before the Wall Street open, lifted the Producer Price index by 1.3% in Feb. – well above Wall Street's 0.5% expectation.

Excluding volatile food and energy prices, the "core" PPI rose 0.4% – twice the consensus forecast.

Tomorrow, the Labor Department will issue its Consumer Price inflation data for last month. Economists only expect "moderate gains" according to Reuters.

But anything greater, and the gap between US interest rates and the rate of inflation will shrink.

Poor returns on Dollar cash deposits have always led to rising gold prices – at least, that's what history says.

And with subprime mortgage lenders continuing to struggle, the US Federal Reserve may find it impossible to raise Dollar interest rates – even in the face of rising inflation.

Click here to read why...