Gold Prices surged and then fell back in yet more volatile trade early Tuesday, regaining all of yesterday's 1.9% drop before slumping $14 per ounce – only to pick up again as world stock markets sank, oil prices ticked below $140 per barrel, and government bonds rose further.

"Renewed inflationary concerns and geopolitical tensions, especially with respect to the Middle East...lead to a bullish outlook," says Standard Bank in Johannesburg in a series of notes analyzing the metals & commodity markets today.

"Although we believe the US dollar remains the main driver of gold investment, underlying credit risk should support precious metal prices and, in particular, the Gold Price."

Noting a 25% drop in the number of bullish gold contracts held by non-commercial traders on the futures market since the record highs of Feb. and March, "there is [now] scope for more speculative strength," the bank concludes.

Looking at Monday's late bounce in the US Gold Market, "support for gold was found at the 100-day moving average of $915 per ounce," noted the team at Mitsui, the precious metals dealer, here in London this morning.

"Silver is moving perfectly in line, with support also at the 100-day moving average. [But] platinum has dropped below its upward trend line from the start of the year.

"With the last three days progressively lower and so below the 100-day moving average level (now $2031), the platinum market may be starting to run out of steam."

Crude oil today slipped further below $140 per barrel, even as political leaders from the world's G8 economies continued to discuss global energy demand, supply and prices at their conference in Hokkaido, Japan.

"As for currencies, there were opinions that cooperation among not only G8 countries but also with emerging economies is needed," said a Japanese official to reporters after an official press release urged "some" emerging nations to let their currencies rise freely on the forex market.

That was taken as a thinly veiled reference to China, which has a large and growing Trade Surplus with the US.

The Chinese Yuan has risen by more than 10% against the US Dollar over the last 12 months, but the People's Bank of China continues to cap its daily gain to just 0.5% whilst also setting a "central parity" target.

Today the US Dollar was little changed against the Yuan at CHY6.862. But it capped the Euro below $1.5750 and held the British Pound beneath $1.9800 after a White House spokesman reiterated President Bush's faith in a "Strong Dollar Policy".

That helped leave the Gold Price for European and UK investors little changed from Monday's US close at €588 and £467 respectively.

Meantime in Tokyo, the Nikkei stock index dropped another 2.5% while Tocom gold futures held steady near their recent four-month highs, equivalent to $937 per ounce.

A further 3% drop in Hong Kong shares, plus a 1.5% drop in European bourses – led by French auto-maker Peugeot Citroen warning of "free falling" sales that have "nose-dived" – took the MSCI index of global equity markets into "bear market" territory, pulling it more than one-fifth below the recent top of Nov. '07.

"Commodity markets are performing strongly, as opposed to poorly performing equity markets," said Robin Bhar, head of metals trading at Calyon – Europe's third largest bank – to Thomson-Reuters earlier this morning.

"The money coming out of equities has to go somewhere. It is prudent to employ some of that in commodities, and more specifically in the Gold Market."

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