Gold slipped back from an early 1% bounce in London on Thursday, holding near a two-week low at $924 per ounce as Asian and European stock markets capped their recent rally.
The FTSE100 index of blue-chip UK stocks fell for the ninth time in 18 sessions so far in July.
Crude oil bounced 40¢ to $124.85 per barrel – down 15% from the record top hit early this month.
"Bearish sentiment towards precious metals continues," writes Walter de Wet, chief analyst at Standard Bank in Johannesburg, "with a number of factors forcing demand down.
"Crude oil is still falling in the wake of the US Dept. of Energy announcing that gasoline inventories have risen faster than expected...The Dollar is also in the process of recovering lost ground, breaking through the $1.5800 support level against the Euro.
"Equity markets, particularly financial shares, have had a positive week so far."
But pointing to the US Treasury's bail-out of Fannie Mae & Freddie Mac – the government-backed agencies standing behind $5 trillion of US mortgage debt – "the underlying fundamental risk in the financial system persists," says de Wet.
"Despite the latest easing in risk aversion, the uncertainty about the health of many financial institutions should support precious metals, especially Gold and silver."
The Gold Price in British Pounds regained one-third of this week's losses to £468 per ounce, and Eurozone investors saw the Gold Price recover to €593.
Over on the currency markets, Sterling slid 1.5¢ to an eight-session low of $1.9830 on news that UK retail sales reversed May's surprise jump in June, falling at their fastest pace on record.
The Euro slipped below $1.5650 – its worst level vs. the Dollar since July 8th – after the Eurostat data agency reported a shock deficit in the currency union's trade balance.
Germany's Ifo institute reported a fresh drop in its business sentiment index, signaling "clearly more pessimism" amongst manufacturers, export firms and employers.
The gloom spread to government bonds this morning, where prices rose sharply as traders anticipated interest-rate cuts ahead.
That forced two-year German Bund yields to plunge 12 basis points to 4.46%. Short-dated UK bond yields sank nine points to 5.01%, undoing this week's losses entirely.
Two-year US Treasury yields slipped five points to 2.73%. Thursday's New York opening brings the latest US home-sales and jobless data.
"In the subprime area," says Larry Fink, head of the $1.4 trillion Blackrock hedge funds, "we may be nearer the bottom. But unfortunately contagion has now hurt other markets.
"Our fear is that the crisis in residential [US] housing is not over. We may have another 10 or 15% decline – and if that is the case, we're going to see further erosion of credit in the consumer area."
Wednesday's fresh drop in the Gold Market took this week's losses to almost 6% – the sharpest fall since gold peaked at $1,032 an ounce on news of the Federal Reserve's Bear Stearns rescue in mid-March.
The latest plunge threw technical analysts a curveball, leaving them scrambling to identify new support levels.
"After the support at $940 an ounce was broken, the next key support will be at $910," claimed Peter Tse at Scotia Mocatta in Hong Kong today.
"I've got to say I didn't foresee Gold sort of breaking through the $936 area as easily as it did," admits Darren Heathcote of Investec in Sydney, Australia.
"But now it's here. We've got to be targeting $912-$904 or something like that."
Whatever happens to Gold in the near term, continued volatility – led by moves in the Dollar and crude oil – are the only professional consensus.
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