The spot gold price rose throughout the first-half of London trade on Friday, touching $651 per ounce by lunchtime – a gain of 1.6% from Tuesday's low – before pulling back to $650 at the US open.

The AM Fix has earlier come in at $648.50, the highest Fix for physical gold bullion since Tuesday's sharp sell-off.

"I own gold and I don’t plan to sell my gold ever," says leading commodities investor Jim Rogers in an interview with India's Financial Express today. But if Rogers were looking to trade – and given a choice between buying base metals, energy and precious metals such as gold right now – "it'd have to be precious metals," he adds, "because gold has gone up much less than the base metals [so far].

"Of those three, that’s where I will put money."

Still trading well below the $692 level hit in April, the gold market looked set to end the second quarter of 2007 nearly 2% lower against the US Dollar. But for the year since January, gold bullion prices have now added more than 1.9% as the US Dollar has dropped 2.2% versus the Euro.

"The Euro-Dollar exchange rate is still the main driver for gold," reckons Michael Widmer, an analyst at Calyon in London. The Euro rose fast on Friday to break above $1.3500 for the first time since June 9th – and that kept the Euro price of gold flat between €480 and €482 per ounce.

The Sterling price of gold for British investors rose to £324.50 per ounce, more than 1.2% higher from Tuesday's low.

"Prices below $650 will definitely attract physical buyers and underpin the market," says Widmer, "but I see a rangebound trade in the coming weeks."

Gold's ongoing recovery from Tuesday's $10 sell-off came as European stock markets held flat and Wall Street opened lower. London police reported defusing a car bomb in the British capital's theatre district. Oil prices held above $70 per barrel.

Despite the threat of resurgent inflation, the US Federal Reserve chose to keep Dollar interest rates on hold on Wednesday. In the accompanying statement, however, "they poured cold water on the idea that the inflation battle has been won," notes Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York.

"No rate cut is being considered in the near future," he believes.

Friday's opening bell on Wall Street was greeted by US Personal Income data for May. Running at 0.4% against 0.6% forecast, its dip was matched by a slowdown in Personal Spending, up 0.5% for the month against 0.7% forecast. Core PCE Inflation, the Fed's preferred measure of the cost of living, ran 0.1% higher from April as expected.

Whatever happens to the official rate of US inflation today, Bill Gross – the head of Pimco, the world's largest bond fund – expects the Fed "to issue an insurance policy" against the widening collapse of subprime US mortgage debt "in the form of lower Fed Funds at some point over the next 6 months."

Nearly 65% of the bonds tracking subprime US mortgage debt no longer meet the credit-rating criteria in place when they were floated, reports Bloomberg. "Downgrades by S&P, Moody's and Fitch would force hundreds of investors to sell holdings, roiling the $800 billion market for securities backed by subprime mortgages and $1 trillion of collateralized debt obligations, the fastest growing part of the financial markets," the newswire warns.

"You'll see massive losses from banks, insurance companies and pension managers,'' says Joshua Rosner, managing director at Graham Fisher & Co. in New York. He accuses the leading credit-rating agencies of underplaying the risks in subprime mortgage bonds.

Indeed, "Markets fear global credit crunch," reports The Daily Telegraph in London after new bond sales worth more than $3 billion were pulled around the world by companies including Kia in Korea, US private-equity fund KKR, and steel giant Arcelor Mitta.

If you're at all concerned about the potential fall-out from a collapse in the global debt markets – currently valued at one-third of the entire world economy – you may wish to consider a position in physical gold bullion, owned outright with no credit risk.