Spot gold prices slipped as the London session began Tuesday, dropping nearly $3 per ounce from the overnight high in Asia at $658.

"We've seen gold push higher since the end of last week," said Gerry Celaya of Aberdeen's Redtower Research to Bloomberg earlier, "mostly because we think the market thinks the Federal Reserve will not be raising rates.

"We think they're wrong."

All that thinking about thinking about US interest rates and gold aside, the British Pound price of gold continued to trade in a tight band either side of £331 per ounce.

For German and French investors looking to buy gold today, the price of gold in Euros held below €490 as the European session reached mid-morning.

On the currency markets the Euro fell back from a two-week high vs. the Dollar on a much-weaker than expected reading from the ZEW consultancy's Institutional Investor Index in Frankfurt.

The European single currency dropped half-a-cent to $1.3390 on the news, helping to pull the gold price lower, while the British Pound also slipped from its highest level since May 7.

Tomorrow brings data showing UK money-supply growth – a gnawing concern for Bank of England policymakers since its annual rate began rising at double-digits in spring 2005 – plus minutes from their June interest-rate meeting.

"Last week’s neutral activity in the spot gold market created a two-week harami reversal pattern," writes Christopher Langguth for Mitsui's weekly technical analysis of the gold charts.

Harami patterns occur when volatility suddenly reduces from one week to the next – in this case, a volatile week of falling prices was followed by a flat and quiet week of trading.

As a result, says technical theory, the declining trend from early April may now reverse after the selling pressure on gold petered out last week.

"The gold price is still above a long-term up trendline that began in July 2005," Langguth goes on.

"If spot gold reaches $675.00 the buying should become heavy."

Gold trading was subdued overnight in Asia, however, with Hong Kong closed for a holiday.

The Economic Times reports that India's physical gold demand is now beginning to pick up due to the onset of the next wedding season. Local traders reported increased buying by stockists and jewelry fabricators.

Oil prices pulled back from a 10-month high in London above $72 per barrel. The European stock markets traded flat.

"Firmer oil prices and the Dollar's slight falls against the Euro encouraged buying to push up gold above $655," noted Akira Doi, director at Daiichi Commodities in Tokyo to Reuters, "but the gold market would need more news to advance further."

Tocom gold futures for delivery in April '08 slipped 0.45% against the Yen today, closing at the equivalent of $661.58 per ounce.

"Gold will be under pressure as investment funds will be keen to lock in their profits ahead of the end of the second quarter," added Doi.

But with short positions in the Tokyo gold market now growing, stop-loss short-covering could be triggered if gold rises above $660 per ounce, he went on.

In the broader commodities market, copper prices fell sharply after Monday's US home-builders' sentiment index showed a sharp fall in confidence.

The United States is the world's second-largest consumer of copper after China – and the average US home contains 400 pounds of the metal in wiring and pipes, reports Bloomberg.

This month, however, the National Association of Home Builders/Wells Fargo index fell to its lowest level since the recession of 1991.

Wednesday will see the release of fresh US housing data, this time showing new building permits granted as well as the volume of new-home construction begun in May.

Wall Street expects US housing starts to have dropped by 3% from April. Last quarter, notes Bloomberg, the number of housing starts fell to a decade-low – and the US Dollar sank against 11 of the world's 16 most heavily traded currencies.

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