Dollar Gold Bullion prices fell to $1775 per ounce Monday morning in London – 0.7% off Friday's close.
"We see very light volume today," says one Hong Kong Gold Bullion dealer.
"Gold could test $1800 soon, while the $1750 level provides good support."
On the currency markets, the Dollar gained along with UK and German government bond prices, while European stock markets fell.
Silver Bullion fell to $34.20 per ounce – a 1.5% drop from the end of last week – while other industrial commodities were mixed.
Over in Leipzig, German chancellor Angela Merkel repeated calls on Monday for a "new Europe" with greater "political union".
Merkel – who this weekend described as "shameful" a series of murders that have been linked to a group calling itself the National Socialist Underground – said today that Europe is facing its biggest crisis since the end of World War Two.
The solution is "more Europe and not less Europe" Merkel told her CDU party's annual conference.
"The Euro is a failed project that has costs barrels full of money," reckons Dutch politician Geert Wilders. Wilders, whose Party for Freedom is known for its anti-Islam stance, has said he is looking at the implications of the Netherlands returning to the Guilder – the currency it had before joining the Euro.
Spain's Socialist government meantime is set to lose Sunday's general election, according to latest opinion polls, which predict a win for the center-right Popular Party.
Yields on Spanish 10-Year government bonds this morning breached 6% for the first time since the European Central Bank began buying Italian and Spanish debt in early August.
Over in Athens, Greece formally appointed Lucas Papademos as prime minister on Friday, while in Italy Mario Monti – former European Competition Commissioner and adviser to Goldman Sachs – was asked last night to form a new government, following the resignation of Silvio Berlusconi.
"Monti's appointment is clearly a positive for markets," reckons Emmanuele Vizzini, chief investment officer at Milan-based asset management firm Investitori Sgr.
Italy's Treasury successfully sold €3 billion in 5-Year government bonds on Monday. The average yield was 6.29% – up from 5.32% for last month's 5-Year auction.
The ECB stepped up its buying of Italian debt towards the end of last week, according to newswire Reuters. During the crisis it has intervened on the open market to buy government bonds of troubled sovereigns – including Greece, Italy and Spain.
The ECB "must stick to [its] mandate" Jens Weidmann, president of the Bundesbank and a member of the ECB Governing Council, says in an interview published in today's Financial Times.
"[It] must not be a lender of last resort for sovereigns because this would violate Article 123 of the EU treaty" – which prohibits central banks directly funding governments.
"[Europe is having] an absurd debate in which we are telling institutions: don't care about the law...if we now overstep [our] mandate, we call into question our own independence."
The Euro fell nearly 1% against the Dollar on Monday morning, hitting $1.34. The Euro Gold Bullion price rose to €1304 per ounce – 0.2% up on Friday's close.
"Doubts and uncertainty over the Eurozone are sure to resurface which could see renewed interest in precious metals, especially gold and silver," says Marc Ground, commodities strategist at Standard Bank.
"However, we continue to warn that should the Eurozone debt crisis result in a severe drying up of money markets in Europe, we could see all commodities fall rapidly, even gold."
China meantime should "operate by the same rules as everyone else," US president Barack Obama told reporters Sunday – referring to the alleged undervaluation of the Yuan against the Dollar.
"Enough is enough."
"[It depends] whose rules we are talking about," responded Pang Sen, deputy director general at China's Foreign Ministry.
"If the rules are made collectively through agreement and China is a part of it, then China will abide by them. If rules are decided by one or even several countries, China does not have the obligation to abide by that."
Chinese Gold Bullion demand meantime continues to show signs of strength.
"There's a lot of material going into China, and New Year demand hasn't even started yet," said a senior executive in the secure logistics industry to BullionVault today from Switzerland.
"This is new, regular and additional traffic [in gold and silver] – levels we haven't seen before."
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