Spot Gold Prices bounced in late US trade on Friday, ending the session at their best weekly close in more than a quarter-century, above the Spot Gold Market peak of May '06 and just a few cents shy of $732 per ounce.

Rising more than 16% versus the Dollar for 2007 so far, Gold Prices also pulled higher after dipping against the other major world currencies, too.

Gold Priced in Euros ended just below €520 per ounce, even after the single currency reached a new record high against the Dollar above $1.4100. For British investors wanting to Buy Gold Now the metal added more than 2.7% this week to finish above £362 per ounce.

Gold Bullion for Immediate Delivery ended the week near 16-month highs against Euros and Sterling and a 23-year high in terms of Japanese Yen.

"The Fed's decision [on Tues] to no longer be concerned about inflation [slashing interest rates by 0.5%] has sent the Dollar dramatically lower and gold dramatically higher," says Dennis Gartman, editor the eponymous and widely respected $5,000 p.a. investment advisory.

"The Fed has unleashed an inflationary force."

"We've got high commodity prices," agrees a mining-stock fund manager interviewed by Bloomberg. "The potential for inflation is palpable, and that's why investors are turning to gold."

Reuters points to "technical buying and short covering" for creating this week's powerful move. But whatever the immediate cause, underlying the new bid for gold sits a genuine concern amongst private citizens in the West that central bankers have lost what little control they had over the money markets.

Confidence in the Bank of England, long-regarded by leading currency analysts as a strong inflation-fighter, finally cracked on Wednesday when the governor was forced – perhaps politically – to accept mortgage-backed collateral in exchange for short-term loans to the private banking sector

Only last week, Mervyn King had told policy makers in an open letter that he would not bail out reckless lenders and borrowers. Two separate columnists in the London Times on Friday both called for King to resign. The UK finance minister was also told to appear before a Parliamentary committee and defend his role in the recent banking panic at Northern Rock, a major mortgage lender which suffered a genuine "run" by anxious savers.

"We expect further [Gold Market] advances into 2008 based on new lows in the US Dollar," said Deutsche Bank in its weekly market report.

"This would, in our view, enable the Gold Price to move above $800/oz during next year. However, our internal forex flow data suggest the Dollar may now be entering oversold territory and that the gold price is ripe for a short term correction."

A correction of sorts came late in the week, with the Dollar Gold Price dipping below $730 at one point early on Friday.

Even so, the metal recorded its two best London Fixes since 22nd January 1980 on Friday – the day after gold hit its all-time peak of $850 per ounce as the Soviet Union invaded Afghanistan, oil prices hit a then-record top, and US embassy staff were held hostage in the Iranian capital, Tehran.

Back here in 2007, Israel this week conducted war-games along its border with Syria – and it refused to comment on allegations it bombed a nuclear facility inside Syrian territory a fortnight earlier – while crude oil prices broke fresh record highs above $82 per barrel.

"It's World War Eight if you believe the Gold Market," said one New York trader on 21st Jan. 1980, the day gold hit its all-time high to date.

While WWIX hasn't yet been declared, investors pointing solely to Dollar weakness for gold's current 27-year highs may be missing a bigger picture of soaring energy costs, geopolitical tension, and wide-spread discomfort with central bank management.

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