Spot gold prices rose above $690 per ounce Friday lunchtime in Europe, recovering all of Thursday's 1.7% drop.
By 11:00 in London, physical gold bullion for immediate delivery had come within almost a Dollar of recording a fresh 11-month high at the London Fix.
European stocks also rose as the Japanese Yen pulled back on the currency markets.
In Tokyo, the Nikkei stock index had already closed the week 0.5% higher. Gold futures for Feb. '08 traded at the Tocom recovered to close the week equivalent to $690 per ounce.
(Click here to learn more about what Japan's low interest-rates are doing to global asset and gold prices...)
Spot gold continued to move higher from key support levels against all major currencies on Friday morning.
Bouncing off $680 per ounce for US investors looking to buy gold, it also turned higher from £340 and €500.
The metal rose steadily as Friday's US open drew near, climbing towards a higher close for the week at £344.75 for British investors and €508 per ounce for Eurozone gold owners. (For the longer-term technical picture, click here...)
"The market is in a corrective phase," reckons Koji Suzuki, a market analyst at Kazaka Commodity in Tokyo.
"Profit-taking is likely to dominate for a while on rallies as the market is starting to get worried about the steep growth in the Chinese economy.
"But there is no distinct reason to sell gold heavily now, so we'll see steady demand from India and other Asian players on price dips."
Chinese stocks also rebounded from Thursday's sell-off today, even though fears of higher interest rates – the apparent cause of yesterday's drop – persist.
China's GDP rose 11% in the first 3 months of this year, said Beijing yesterday. Now a survey today of 19 economists forecasts an increase in its benchmark lending rate, plus three further hikes in China's banking reserve requirements according to Bloomberg News.
Falling gold sales in India were blamed today on higher interest rates in the sub-continent.
India, the world's largest consumer of physical gold bullion for jewelry and basic savings programs, saw demand drop 10% last year from 2005 according to the GFMS consultancy.
And now, "compared with this time last year, domestic demand for bullion is almost 30-40% lower in Mumbai," says Prithviraj Kothari, director of Riddhi Siddhi Bullion.
Last spring, demand peaked at more than 1,000 kg a day, says Kothari. It has now fallen as low as 200-300 kg on an average.
Seasonal demand due to the Akshaya Thrithiya celebrations briefly improved sales late last week, he adds. But as Gold News had forecast, India's booming economy is proving a double-edged sword for gold jewelry sales.
"Rising interest rates have encouraged investors to opt for fixed deposits that earn 10-11% annual returns," reports the Hindu Business Line today.
A strengthening Rupee has also dented gold sales short-term, the newswire says.
"We will probably see some consolidation at current levels before gold starts moving northwards again," says Chirag Sheth, an analyst at STCI Commodities in Mumbai.
He believes spot gold prices – driven by global investment demand – will likely to rise to $700 an ounce in the first week of May.
Investment in exchange-traded gold funds (ETFs) rose nearly 6% in the first 3 months of this year, said the World Gold Council on Thursday.
Its quarterly investment digest cites Dollar weakness, rising energy prices, rising inflation and fresh geopolitical worries for gold's continued bull market. (Are these factors really the cause? Click here for the facts...)
The World Gold Council's analysis is also optimistic about 2007 gold jewelry sales.
"The underlying strength of gold and its long-term outlook as an investment vehicle continues to outpace both commodity and equity markets," says Katherine Pulvermacher, the WGC's analyst.