Gold eased back from near 1-week highs early in London on Monday, cutting Friday's 2.8% surge by one third as Asian stock markets closed the day sharply lower and European shares also fell.
US, UK and German government bonds ticked lower, nudging interest rates higher, while European crude oil edged back below $99 per barrel but US contracts rose to $89.70.
The Moody's rating agency cut Egypt's government bonds to Ba2 from Ba1, calling the credit outlook "negative", as street protests against the Mubarak regime continued for a seventh day in Cairo.
"[Gold] buying continued on fears the unrest in Egypt will spread across the Middle East," says Richcomm Global Services in Dubai.
But "Asia's gold market is less sensitive to what happened in Middle East compared to New York," said a Hong Kong dealer in a note this morning.
Trading volume in US Gold Futures hit a two-month high of 300,000 for the second day running on Friday, reports the AAP newswire, after the huge drop in total bets apparently caused by $10 million investment fund SHK Asset Management closing $850 million-worth of "spread" positions.
In the week-ending last Tuesday – the latest data available – the "net long" position of bullish minus bearish directional bets now held by institutions, funds and other large speculators in Gold Futures and options shrank to its lowest level since July 2009, down to 547 tonnes equivalent.
Overall, the "net long" position held by funds as well as private individuals shrank by 23% from a month earlier – the fastest pace of contraction since July 2010.
"Investors in physical metal have not let themselves get influenced by the happenings in the exchange-traded gold products," writes head of sales Wolfgang Wrzesniok-Rossbach at German refining group Heraeus.
"Reports from India say that the premium for investment Gold Bars, due to a combination of higher demand and limited supply, has reached a two year high...In Germany demand for investment gold [also] remains robust. And even though production is running at full-capacity, some denominations are experiencing delivery period delays mainly because orders have already been sold well before the smelter has produced the bars."
Shedding another two tonnes of physical metal on Friday, in contrast, the SPDR Gold Trust began Monday's trade with 1224 tonnes of Gold Bullion following its sharpest 1-month redemption since July 2009.
Now 4.7% smaller than a month ago, the world's largest Gold ETF shrank by 6.8% after the collapse of Lehman Bros. in Sept. 2008 and by more than 9% in May 2008 following the collapse of Bear Stearns.
Early Monday in London, Silver Prices also cut Friday's sharp gains, easing back from an 8-session hit at the start of Asian dealing above $28.40 per ounce.
The Euro meantime rose back above $1.37 to the Dollar, pushing the Gold Price for German, French and Italian buyers almost 2% down from an early 1-week high at €31,750 per kilo.
The Gold Price in Sterling also fell hard as the Pound rose to $1.59 following an article in the UK's left-leaning Guardian newspaper by Bank of England policy-voter Martin Weale, in which he said there's a "powerful case [for a] "modest rise" in interest rates.
Bank of England interest rates have now been below the pace of inflation since December 2009. Weale was out-voted 7-2 at Jan.'s BoE policy meeting.
Looking at the Dollar-price chart, "There is a two-and-a-half-year bull trend line that comes in this week at $1291," says the latest technical analysis from bullion bank Scotia Mocatta, pointing to the rising trend in Gold Prices starting in Sept.2008 after the collapse of Lehman Brothers.
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