Spot gold prices broke higher to hit $691.50 per ounce late in New York on Monday – an 11-month peak.
Physical bullion prices then pulled back in Asia early on Tuesday, before opening London just above yesterday's start at $688 per ounce.
"Fresh funds are flowing into gold," says Shuji Sugata at Mitsubishi Futures and Securities.
"Buying by Asian end-users is also spotted as market fundamentals are healthy."
Indian demand from jewelry buyers is set to rise strongly this month, as the wedding season coincides with a key festival in the southern states (click here to learn more...).
Overnight in Tokyo's futures market, gold for delivery in Feb. '08 hit a peak equal to $696 per ounce, its highest level since Feb. 27.
Comex gold for Dec. '07 hit $713.80 per ounce during the electronic session.
But with the gap between spot and futures prices already at historic highs, demand for physical bullion for immediate delivery seems to be attracting the bulk of new interest.
Turnover in London's physical bullion market rose to 20.6 million ounces in March, said the London Bullion Market Association yesterday – the highest volume of physical gold trading since the current uptrend began in Oct., nearly 29% higher than Feb.
Open interest in the New York gold futures market, however, fell during March according to the Commitment of Traders data.
The number of individual deals in London's physical gold market last month was in fact the highest since May last year, the LBMA added.
Back then gold spiked to a 26-year high above $720 per ounce. (For more on the dynamics of the gold market in 2006-07, click here and read on...)
"Continued buying interests after [last night's] New York close pushed gold marginally higher but lacked momentum," says today's note from Standard Bank in Australia.
"[But] with gold managing to post a fresh high for the year after briefly piercing $690 resistance and there remained strong physical demand, it is encouraging for the yellow metal for an orderly rally to target the psychological mark of $700 in the near-term.
"Immediate support around $680 and further below at $670 should prove to be buying opportunities should the market dip lower."
For British investors, now waking up to retail price inflation at a 16-year high of 4.8%, last night's top at $691.50 came within 0.7% of an 11-month high in Sterling.
Gold priced in Pounds hit £350 per ounce late in Feb. This morning, as the British government reported consumer-price inflation at 3.1% – outside the Bank of England's target zone for the first time since it gained operational independence in 1997 – gold opened London at £345.30.
(What can the Bank of England do to tame the inflation it's helped create? Click here for the gold market's view...)
The Euro-price of gold, meantime, continues to lag. Last night's top was still 1.7% away from Feb.'s high above €520 per ounce.
At the start of London trade today, gold priced in Euros traded at €508.
"We see some profit taking as the Dollar is up slightly," reckons Wallace Ng, chief precious metal trader at Fortis Bank in Hong Kong.
"This pullback in gold is very normal after the recent rally."
Meanwhile, the weekend's revelations about Britain's huge gold sales of 1999-2002 have been followed by news that gold holdings at the Qatar Central Bank rose more than fivefold during Jan. and Feb. this year.
Qatar said last year that it wanted to diversify its foreign exchange reserves away from the Dollar.
By the last day of Feb. 2007, it held some $65.97 million in gold, up from $12.17 million at the end of Dec. – suggesting that Qatar bought 2.49 tonnes during this two-month period according to ResourceInvestor.com.
And the fuss about Britain's gold sales of 7 years ago? Click here now for the full story...