Gold recovered 0.8% from its third dip to $1007 in two days early Thursday in London, as world stock markets fell and government bond prices rose.

Commodities slipped 0.5% on the Reuters-Jeffries CRB index, but the US Dollar held near 12-month lows on the currency market after the Federal Reserve voted to keep its key interest rate at zero, extending by 3 months its $1.5 trillion quantitative easing of mortgage-bond purchases.

"Although speculators are piling in, the [Gold] market doesn't seem feverish," notes the Virtual Metals consultancy in its latest Metals Monthly report for BNP Paribas and Fortis banks.

"A limited pullback is the most likely short-term move," says VM, "but in the mid-term a rally far beyond where we are today will largely depend on inflationary trends."

For silver – up by 18% in the last month – it's a case of "Anything you can do, I can do better," says VM.

"If gold shifts higher, then silver will continue to outperform. On the other hand, a gold pullback, which is quite conceivable, should see silver underperform."

Short term, says another London dealer in a note today, Gold's direction "[is] dictated by the weakness or strength of the US Dollar.

"Trading is becoming more erratic."

"Gold remains well supported despite the US Dollar strengthening against the Euro early this morning," says Walter de Wet at Standard Bank.

"The support is even more noteworthy given crude oil's slide yesterday" after much weaker-than-expected US energy-use data.

Overnight the US Dollar rallied from new 2009 lows vs. the Euro, helping to hold the Gold Price in Euros above €685 an ounce.

The US currency fell further against the Japanese Yen however, sliding back towards last week's 7-month lows near ¥90 per Dollar.

Sterling meantime sank on a raft of bad news, hitting a five-month low against both the Euro and Yen after Britain's chief central banker, Mervyn King, said he wants to keep the Pound weak.

"[The] rebalancing of the UK economy that I have been talking about for about 10 years is very necessary," the Bank of England governor said in an interview with Newcastle's Journal.

"I think the fall in the exchange rate...will be helpful to that process. What we need to see now is a shift of resources into net exports...producing things that compete with imports that help to reduce the trade deficit."

News also broke early Thursday that the Bank of England has called a seminar of "all" major economists on London next Tuesday, apparently aimed at reassuring bank analysts over its record-low interest rates and record-breaking program of quantitative easing – currently funding the UK government's entire budget deficit for 2009-to-date.

Private UK banks face "very notable...downgrades", warned ratings agency Moody's today, if the government goes ahead with plans for 'living wills' to make dismantling bankrupt lenders easier in future.

On the political front meantime, UK prime minister Gordon Brown suffered a series of rebukes from the US White House, which leaked news that it turned down five separate requests for head-to-head meetings with president Barack Obama ahead of this weekend's G20 summit in Pittsburgh.

At home, a Labour MP resigned as parliamentary aide over Baroness Scotland's refusal to stand down as attorney general, despite being given the maximum £5,000 fine for employing an illegal immigrant – legislation she herself pushed through Parliament.

Today the Gold Price in Sterling – more than three times higher from Gordon Brown's famous gold sales of 10 years ago – jumped 1.5% to a fresh 5-month high of £627 an ounce.

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