Gold Bullion prices drifted lower Wednesday morning, hitting $1640 per ounce ahead of US trading – 1.1% down on the week so far – while stocks fell and commodities were broadly flat.
Silver Bullion fell as low as $31.52 per ounce – broadly in line with where it started the week.
UK government bond prices dipped – while German bunds gained as Eurozone concerns continued to focus on Spain.
"This morning, we've seen [precious metals] succumb to waning investor enthusiasm," says Marc Ground, commodities strategist at Standard Bank.
"People won't want to commit too much at this point," agrees Ronald Leung, a dealer in physical bullion at Lee Cheong Gold Dealers in Hong Kong.
"There is some [gold] buying when prices fall to the $1630-$1640 level, but the volume shrinks when prices rebound to $1660-$1670."
The daily average volume of Gold Bullion transferred between parties by clearing members of the London Bullion Market Association rose to 622 tonnes last month, a 3.8% gain on February, according to LBMA figures published Tuesday.
"The value of transfers [however] was broadly unchanged a $33.8 billion," the LBMA reports, "reflecting the fact that higher trading activity was offset by the fall in the Gold Price".
On an annual basis, the daily average volume of gold transferred was up 6.4% on March 2011.
Transfers of Silver Bullion meantime averaged 4889 tonnes – a 1.8% fall on February.
European stock markets traded lower Wednesday morning, with the FTSE in London down around 0.5% and Germany's DAX off 1% by lunchtime. The falls are in contrast with gains seen in Asia and Tuesday's US session.
These rallies followed publication Tuesday of International Monetary Fund forecasts showing the IMF has revised upwards its expectations for global economic growth, though it says it still expects the Eurozone's economy to shrink.
Yields on 10-Year Spanish government bonds eased slightly to 5.8% Wednesday morning, ahead of tomorrow's auction of 2-Year and 10-Year debt.
Analysts are concerned however that Spain's struggling economy could threaten a banking crisis and compromise the government's fiscal position.
"If you look ahead, let's say the next six months, I would not be surprised if [Spanish banks] have to get some kind of European support," says Carsten Brzeski, Brussels-based senior economist at ING, adding that banks would need funds from the European Financial Stability Facility, the Eurozone's temporary bailout fund set up in 2010.
The number of non-performing loans on Spanish bank balance sheets "will have to rise when you take into account the unemployment rate and what's happening with the economy," says Andrew Bosomworth, head of portfolio management at world's largest bond fund Pimco in Munich.
"One of our concerns in Spain is to what extent contingent liabilities could pass to the central government."
In New York, hedge fund boss John Paulson – whose firm offers investors Gold Bullion denominated funds – has told investors he is shorting German bunds because he expects deterioration in the Eurozone will end up affecting Germany's creditworthiness, the Financial Times reports.
Here in the UK, "elevated inflation might be more persistent" than the Bank of England's Monetary Policy Committee previously expected, according to minutes published Wednesday of the MPC meeting earlier this month.
Only one MPC member voted to increase quantitative easing – down from two members last month.
The publication of the minutes – as well as that of a speech by MPC member Paul Tucker in which he describes inflation as "uncomfortably above target" – was followed by the Pound rallying against the Dollar.
The Gold Price in Sterling fell to £1026 per ounce by lunchtime in London – 1.9% down on where it ended last week.
UK unemployment meantime fell to 8.3% in February – down from 8.4% a month earlier – according to the International Labour Organization's 3-month unemployment data published this morning.
The majority of reserve managers at the world's central banks consider gold a more attractive investment than last year – while they are wary of Euro exposure – according to a new survey by Central Banking Publications.