The Gold Price dropped out of a tight range early Tuesday, slipping 1% as world stock markets reversed one-fifth of last week's surge.

Twelve months to the day since Gold Bullion hit an all-time Dollar high above $1,000 an ounce on the firesale of Bear Stearns to J.P.Morgan, the AM Gold Fix today stood 11% below last March 17th's record at $922.

The S&P index on Wall Street was priced to open at 754, down 41% from this time last year.

For UK and Eurozone investors Ready to Buy  Gold this morning, the price stood 28.5% and 9% higher against the Pound and Euro respectively.

The London and Frankfurt stock markets, in contrast, traded more than 30% below their levels of 17 March, 2008.

"There's been a good deal of optimism in the stock market in the last week or so," notes Steven Barrow in his G10 currencies note for Standard Bank.

"A key test is whether this can continue even in the face of poor economic data."

Tuesday morning saw the US Census Bureau report a surprise jump in the volume of new housing construction for Feb., up by almost one quarter from Jan.'s data despite the glut of existing supply, flagging sales, and weak home-builder confidence.

The Bureau of Labor Statistics meantime said the price of finished goods leaving US manufacturers rose 4.0% last month (excluding energy and food items) from a year before.

Tomorrow the Federal Reserve is expected to keep its key lending rate at between zero and 0.25% per year.

"A distinct lack of physical market appetite, and the continuing inflow of scrap metal, equal the foundation for a weaker Gold Price," reckons Mitsui, the London-based gold dealer, in its latest Gold Investment analysis.

"Add into the mix a positive week across equity markets, and gold – in theory – is set to charter quite negative waters. [But] enthusiasm for gold is once again heightened in the global suite of ETF products, and most particularly the SPDR contract."

The world's No.1 Gold ETF, New York's SPDR trust fund swelled the volume of gold "backing" its shares by 1.1% Monday, hitting a new all-time record of 1,069 tonnes.

That's larger by nearly two-thirds from this time last year.

"With the chief driver of the 2009 price direction returning with fervor to the market in recent days," Mitsui goes on, "it is reasonable to foresee gold moving extensively to the upside if (and only if) the ETF players continue their love affair with the yellow metal."

On the other side of the trade, meantime, the Chinese government risks doing "too little, too late," says Frank Gong, chief China economist for J.P.Morgan, quoted by Finance Asia.

"A short-term boost to consumer spending is needed to prevent the spread of deflationary expectations."

Now struggling with post-bubble deflation and recession since the end of 1989, Japan today reported an 84% plunge in new machine-tool orders for Feb.

Across in the oil-rich Middle East, "An overt economic stimulus package is no longer a policy option but a necessity," says ArabianBusiness.com, summarizing a new report from Markaz, the Kuwait Financial Centre.

Falling oil prices – plus retrenchment by foreign banks – may see Bahrain and the UAE suffer a true deflation in their money supplies, Markaz believes, threatening a depressionary spiral.

In Switzerland – where mortgage rates now stand at 1.5% per year after the central bank slashed its overnight rate to zero – new industrial orders fell almost 9% from a year earlier at the end of 2008, the official data agency reported this morning.

Here in the UK, where mortgage rates still stand above 4.0% – despite official Base Rate hitting just 0.5% – average home prices showed an 11.5% drop in the year-to-Jan. official data said today.

In the 16-nation Eurozone, however, European Central Bank Executive Board member Juergen Stark said there is not a great deal of room for additional interest-rate reductions, Handelsblatt reported.

"We [only] have a little more room" to cut interest rates, says European Central Bank member Jürgen Stark in a newspaper interview with Germany's Handelsblatt.

"For me personally, the [low] threshold isn't far away from the current level."

Remaining negative for the 19th month running, Germany's ZEW survey of economic sentiment today still showed another improvement in March, rising to minus 3.5 and gaining for the fifth consecutive month from Oct.'s near-record low of minus 63 today.

Monday saw the official EuroStat data agency report annualized consumer-price inflation of almost 5%.

Official ECB interest rates now sit at 1.5%.