Spot gold prices continued to disappoint short-term Dollar bears as the London session drew to a close on Monday.
After losing $14 per ounce on a small Dollar bounce vs. the Euro last Thursday, the metal dropped another $3 to $677 at today's PM Fix in London, before rattling in a volatile range around $680 per ounce.
This dip in Dollar gold prices – the first week-on-week drop since the beginning of March – came even as the greenback slipped on tame inflation data.
According to the Bureau of Economic Analysis, personal incomes and spending in the US rose right in line with expectations in March.
The core PCE deflator – the US Federal Reserve's favored measure of inflation – remained unchanged from Feb.
A change of 0.0% in the cost of living may jar with most US citizens' experience right now. But the so-called "core deflator", after all, excludes fuel and food. (Get the facts about Washington's inflation con job – here...)
Faced with a slowdown in the national US housing market, the Fed looks increasingly likely to keep its interest rates on hold when it meets next Wednesday.
Monday's Wall Street opening also brought data showing business activity slowing in the mid-West. (What might static US interest rates mean for gold? Read more now...)
"If the central banks hadn't been selling, gold would be above $700 now," spat one disappointed futures broker in London earlier.
The European Central Bank is due to report its gold sales for last week on Wednesday. Its previous report said that two European banks sold 17.5 tonnes of bullion in the week ending April 20th – a nine-fold increase on the preceding week's sales.
That period marked gold's first failure to break €511 per ounce, a new high from Feb.
Following gold's second failure at that level last Monday, it also slipped back from £345 for Sterling investors, and dropped back from $692 for US investors, too.
"The Dollar has come up a little bit today," added the London broker, "and some people in the market didn't do very well last week and want to get out." (Get a longer-term technical analysis here...)
Oil prices in London meantime held above $68 per barrel, while inflation in the Eurozone was reported to have slipped to 1.8% annualized in March.
The Euro nevertheless added half-a-cent to $1.3640 in the forex market, just shy of the all-time record high hit late on Friday.
And on a simple demand-and-supply basis, the European Central Bank will be grateful for today's fresh weakness in the Dollar.
The ECB today admitted that the Eurozone money supply grew by 10.9% in March, a fresh 17-year record.
Amid the ongoing frenzy of corporate merger & acquisition deals that's driven four years of double-digit gains in European stock markets, loans to insurance companies and pension funds rose by more than 20% from March last year.
"Against this background, a 25 basis-point hike in June [to 4.0%] is a certainty," says Erik Sonntag, an economist at ING Bank in Brussels, "even though empirical evidence on the link between money growth and long-run inflation pressures is somewhat mixed."
(Mixed? Click here for the "long run" facts about the money supply and inflation...)
Back in the gold market, contrarian investors may look to time fresh purchases against the sudden turnaround in analyst sentiment.
All talk of $700 per ounce has now evaporated along with demand from the physical markets of Japan and China, both closed for national holidays this week.
Only 12 out of 26 professional gold traders and analysts interviewed by Bloomberg late last week advised buying the metal.
Today, "we would not add to any long precious metals positions and would rather look to rein in risk," said a report from analysts at UBS, Europe's biggest bank by assets.
But UBS remains bullish long-term, advising that it will wait for gold to pullback to $640 per ounce before increasing its position.
"[Gold traders] are lightly invested and looking for a correction to add to positions," it believes.