Gold Prices slid yet again overnight on Thursday, giving back all of yesterday's 1.9% rally to reach fresh one-month lows below $860 per ounce as Western stock markets rallied, led by beaten-down banking shares.
Bond prices slipped, pushing interest rates higher. The Dollar rose sharply against natural resources and non-US currencies.
"Looking back over the past six months it is clear that Gold did too much, too soon, and is now feeling the after-effects," says the latest Fortis Metals Monthly produced by the VM Group in London.
"Another failure to head towards $950 per oz could see some of the long positions throw in the towel," it adds. But looking ahead, "one supportive factor is very weak central bank sales."
Studying data from the International Monetary Fund (IMF), the research finds that "so far this year net sales have been just 75 tonnes – an annual rate of just 215 tonnes a year and far lower than normal.
"We don't expect a pickup in sales throughout the summer or even from October when the final year of the Central Bank Gold Agreement begins. That will only occur when the IMF Sales Plan is given the go-ahead."
On the other side of the trade today, bond yields pushed higher as European stock markets bounced, led by a sharp rally in HBOS – the UK's largest mortgage lender, which yesterday fell through the offer price of an emergency cash raising.
That threatened "the biggest equity capital flop since the BP fiasco of 1987," as Patrick Hosking notes in today's Times.
"I think the bad news for the economy, the political and financial environment...is more or less already in the Gold Price," said Rhona O'Connell of GFMS Analytics on Moneyweb's Business Update radio show earlier this week.
"In the relatively short term investors [were] not convinced by this latest rise towards $900, because typically you'll find mining shares will lead the Gold Price.
"If you find that gold mining shares are underperforming, then that means people are not convinced and you should expect a correction in the price – and sure enough, we've got one."
The FTSE100 here in London added 0.9% by lunchtime, clawing back one fifth of this month's losses to date. In India the BSE index reversed an early 3% drop – sparked by the central bank hiking its key lending rate to combat inflation – to close 0.4% higher.
The Gold Price in Mumbai's wholesale bullion markets, slipped more than 100 Rupees per 10 grams after the Reserve Bank raised its repo rate for the first time in 15 months, moving it 25-basis points north to 8.0%.
Consumer-price inflation in India – the world's hungriest market for physical gold – was last pegged even higher at 8.24% annually.
Ahead of Friday's consumer-price data in the United States, "what we're seeing is a very painful experiment to see what oil price will get demand to slow down," believes Adam Sieminski at Deutsche Bank.
"Four dollars a gallon is slowing consumption in the United States. But there is an awful lot of people in the developing world and they all want a car and they all want a better diet.
"That is putting a lot of pressure on food and energy prices."
After jumping $5 per barrel on Wednesday, crude oil today slid 2% as base metal and food prices also fell back and the US Dollar rose sharply on the forex market.
Despite news of strong Eurozone industrial growth in April, the Euro fell to a new one-week low beneath $1.5400. The British Pound dropped 1% to the Dollar even as the Bank of England reported a surge in the UK public's inflation expectations.
Seeing a current inflation rate of 4.9% p – p rather than the official 3.0% CPI reading – consumers in the UK now feel cash in the bank is paying next-to-nothing after accounting for the increased cost of living.
"You know those complaints you've been hearing about high food prices?" asks Jason Ward, an analyst at Northstar Commodity in Minneapolis, in the New York Times today. "They've only just begun."
"If India and China continue the economic growth rate," adds Justin Lin, chief economist at the World Bank, "their demand for energy will increase, and that will put up world pressures."
In a bid to address the underlying cause of today's surging world inflation, however, "we have conveyed to the US government that a Strong Dollar is in the interest of the US economy," says Zhu Guangyao, assistant to the Chinese Finance Ministry.
"The Dollar is clearly getting on Asia's nerves," as William Pesek writes at Bloomberg. "Aside from hitting the region's competitiveness, the trillions of dollars of reserves held in Asia are losing value by the day."
Yet ahead of meeting with Chinese officials at the Strategic Economic Dialogue next week, US Treasury secretary Hank Paulson has called on them once again to let the Yuan rise further, even after its 20% gain of the last three years.
"We're seeing this effort by the US to devalue its way to economic growth," believes Randall Kahn at Apiana Investments in Tokyo.
"The problem is it's not going down well in Asia."