Spot gold prices bounced towards $660 per ounce by the London close today.

The metal had earlier dropped 1% on stronger than expected US data.

"Volumes are thin," said Stephen Briggs at SG Corporate and Investment Banking to Reuters, "so you are likely to probably get some bigger swings.

"But I think gold is going to be range-bound in the short term."

The Bureau of Economic Analysis said today that America's GDP in the fourth quarter rose 2.5%, up from 2.0% growth in the third quarter and ahead of initial estimates of 2.2%.

Backing up the implication of "no change" in US interest rates was a reported drop in initial jobless claims, too. (Why do US rates matter so much to gold investors? Click here to find out...)

In the stock market, European equities closed nearly 0.9% on average. They began rising early on Thursday despite Ben Bernanke voicing "uncertainty" about the US housing market and economy to Congress on Wednesday.

Following the initial 1% drop in US stocks, in fact, the press coverage of the Fed chairman's comments looks favorable.

"Bernanke said the Federal Reserve needed more flexibility," reported the London Times.

But the newspaper also noted that the "chairman rejects fears of a recession."

(For more about Dr. Bernanke's testimony – and the true scale of the US housing bust – click here now...)

Earlier in Japan, the Tocom's gold futures contract for delivery in Feb. '08 slipped 0.4% to equal $668.94 per ounce.

"Expectations of liquidation ahead of the end of the first quarter," said one senior analyst to Reuters, "[means] we see some pressure on gold prices both at the Tocom and overseas."

Politically, the ongoing row about 15 British Navy staff captured by Iran last Friday "is a situation where external events could surely induce volatility in gold prices," reckons David Moore for the Commonwealth Bank, Australia.

"A further rise in crude oil could help gold move towards $670 in the near term."

Over in Dubai, Pradeep Unni – chief analyst at Vision Commodities – agrees.

"Though markets cool off as the issue subsides, it gives us clues to the sort of potential bull run crude oil and gold can witness when a global unrest of this order emerge."

But is this connection really so strong? Gold held steady above $600 even as crude oil sank below $60 per barrel in the six months to March.

Recent history says that gold has become more closely correlated to stocks!

To get the facts now, click here...