Gold Prices slipped early Tuesday, dropping to a two-day low beneath $781.50 per ounce as stocks, bonds and interest-rate futures also fell on a rumor that the US central bank may not cut Dollar rates when it meets tomorrow.

"Although markets have positioned themselves for a 25 basis points cut," noted Walter De Wet at Standard Bank in Johannesburg this morning, "anything more would be bullish for metals, while anything less, bearish."

Two-year US Treasury bonds fell for the fourth day as speculation grew that the US Federal Reserve may "pause" after slashing 50-basis points off the cost of Dollars last month.

That pushed the two-year yield up from 3.69% last Tuesday to 3.83% just ahead of today's Wall Street open. Interest-rate futures saw the odds of a quarter-point cut slip to 90% from yesterday's 98% reading.
 
"The current market environment is more fragile than usual," writes Greg Ip in the Wall Street Journal, "and thus the consequences of disappointing the market are potentially more damaging. Against that, the Fed will have to weigh the risk that a cut will stoke inflationary psychology."

Ip is said by Reuters for "sometimes reflecting the views of senior central bankers."

"Everybody sits back and assesses the economy, and it's not a 100% chance, so you see people take risk off the table," reckons Jeffry Feigenwinter at BNP Paribas in New York, and the apparently risky trade of Buying Gold took a dip alongside the Euro, crude oil, global equities and agricultural commodities.

Wheat, soybeans and corn prices all fell on better-than-expected harvest news, while platinum, palladium and silver all fell faster than Gold Prices ahead of Thursday's US car-sales data.

"The recent figures we have heard from Germany and the States are more or less negative," says Wolfgang Wrzesniok-Rossbach at Heraeus, the metals refinery group.

"The car market is doing okay but it's not performing overly well. That may cause some slowdown in actual demand [for platinum-group metals] on a short-term basis."

But looking at the Gold Market longer-term, "the projection from [gold's] the 17-month base is $890 per ounce," says Christopher Langguth in his weekly technical analysis for Mitsui. "From the low trade the week of 17 August...the projection is $871.50.

"All this suggests the rally is unlikely to end at $800.00. There is no reason to be short now."

Further evidence that the bull run in Gold Prices may yet run further from Monday's 27-year highs also comes from the much-studied Commitment of Traders report. Detailing the position of gold-futures traders in the week-ending last Tuesday, the most recent report shows that non-commercial traders – often known as the "dumb money" for their habit of buying high and selling low – actually cut their bets that Gold Prices would continue to rise.

"An $11 per ounce drop [last] Monday likely scared away longs the day before the data were tabulated," says this morning's comment from Scotia Moccatta. But volatility after a run of rising prices is only to be expected in a market that moves twice as fast, on average, as the US stock market.

"The drivers for the Gold Market are pretty much intact," adds Ashok Shah at London & Capital, speaking to Reuters. "The credit crunch shows no sign of relenting and...the Fed will be forced to respond by cutting rates repeatedly.

"Gold is running on the back of that."

For now, however, Gold Priced in British Pounds continued to retreat from yesterday's new all-time highs, dropping 2.1% from the peak above £386.50 per ounce. For European investors wanting to Buy Gold Today the price offered a 1.5% discount from Monday's early top as it slipped to a two-day low at €531.

"In the current environment, upward pressure on the price of gold is likely being driven by the economic environment surrounding the US economy, in particular the strength of the US Dollar, the oil and commodity prices and a change in the dynamics surrounding gold supply and demand," reckons David Davis, analyst at Credit Suisse, in a new report on the Gold Market.

The Chinese government today said that the country's gold output rose 13% between Jan. and Sept. this year, taking it ever-closer to eclipsing South Africa as the world's No.1 producer.

But global gold-mining output will need to rise by 6,679 tons between now and 2015, says Davis at Credit Suisse, if it's to meet the expected increase in Gold Investment and gold jewelry demand.

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