Gold Prices gave back an overnight spike early Monday to reach a two-week low of $778 per ounce before bouncing into the US opening.

Asian stock markets ended the day unchanged after European bourses began the week lower. Wall Street futures pointed down, capping their four-day rally, as crude oil futures fell below $88, more than 11% below the all-time record top of two weeks ago.

"We feel this is very much a wait and see market," says Brandon Lloyd in his Gold Market note for Mitsui in Sydney this morning.

"As with everything else, it looks like volatility is going to rule the roost. No one trader REALLY knows where anything is going."

After losing value for four sessions running on Friday, Comex Gold Market futures for Feb. delivery jumped $7.70 in Asian trade today, hitting $796.8 per ounce before falling below last week's closing level.

"Everybody is looking for the Gold Price to go down," said one Singapore gold dealer to Reuters earlier this morning.

"Of course this is good for my customers, especially jewelers. In fact, the physical Gold Market is busy with people buying back gold bars.

"We are having good buying from Vietnam, Indonesia and Thailand."

At the Tocom futures exchange in Tokyo today, the most-active contract – for delivery in Oct. '08 – fell 0.5% to equal $798 per ounce as the Japanese Yen bounced on the currency markets.

The US Dollar, having added 3.9% against the Yen since last Tuesday, slipped out of that uptrend, but it kept the Euro near a two-week low at $1.4640.

The British Pound, meantime, leapt more than one cent higher to $2.0630 after Nov.'s Purchasing Managers Index came in well above City forecasts, denting hopes of a cut to UK interest rates when the Bank of England meets this Thursday.

That pushed the Gold Price in Pounds down towards a two-week low beneath £380 per ounce. It also sent UK government bond prices lower after an early rally saw the two-year gilt yield slip four points to 4.47%.

Bank of England interest rates are currently 5.75%, the highest of any G7 economy. A Bloomberg survey today shows 44 out of 61 professional economists interviewed expect the BoE to keep rates on hold this week.

The European Central Bank also looks set to stick with its rate of 4.0% when it also meets Thursday, but "policymakers cannot wait to see spillover effects of tighter credit conditions on the economy," says the Bank Credit Analyst.

London's interbank borrowing rate closed last week at 5.95%, more than 0.6% higher from the end of Oct.

"Quality spreads have soared and bid/ask spreads have blown out around the world," the BCA goes on. "In Europe, it is alarming that interbank dealing in covered bonds came to a halt last week and planned high-quality debt issuance was cancelled.

"Interbank lending is the main channel through which central banks affect financial markets and the economy. [So] the US Fed needs to cut interest rates promptly, and pressure is building on other central banks to follow suit."

Moody's Investors Service, the credit ratings agency, warned this weekend that $65 billion in debt issued by Citigroup, the world's largest bank, is now "at risk" from the ongoing crisis caused by the collapse of US subprime mortgages.

It reported "material declines in market value" right across the special investment vehicles (SIVs) used by major banks to hold higher-risk debt off their balance sheets.

Out of $130 billion in SIV bonds reviewed since Nov. 7th, according to The Age in Australia today, Moody's has its rating on nearly 11%, confirmed the existing quality of 8.5%, and put the remaining 81% on review for downgrade in future.

According to independent analysis, a firesale of home-loan bonds by ailing stock broker E*Trade raised as little as 11¢ on the Dollar. The sale was part of a $2.5 billion cash injection led by hedge-fund investor Citadel Group.

In the broader commodities sector this morning, soft commodities were mixed while copper and lead prices fell at the London Metal Exchange. Zinc also fell, dipping into last week's gains and taking its losses over the last two months to 16%.

The supply of zinc may rise by 11% in 2008 according to a new report from UBS today, as 15 new projects come on-stream.

Gold production in Australia, in contrast – the world's third largest producer – held flat between July and October according to a report out today from Surbiton Associates.

Australia produced 61.7 tonnes of gold in the third quarter, around one tonne less than during the second quarter and equal to output to Q3 '06.

"Each year, around 250 tonnes – or eight million ounces, worth more than $7 billion – are mined in Australia and an equivalent amount of gold must be discovered annually just to maintain reserves," said Sandra Close, director of Surbiton Associates, to the Herald Sun.

"In the longer term, there is no substitute for exploration."

News of Australia's flattening gold output comes less than a week after the Gold Price for Australian investors hit a new all-time record high of A$939 per ounce.

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