U.S. Dollar Gold Prices continued on Monday morning where they'd left off on Friday, zigzagging around $1495 while global stock markets fell along with major industrial commodities oil and copper.
Major government bonds ticked lower, nudging interest rates higher.
Silver Prices hit a low of $34.10, down almost 4% from Friday's close and 14% off last week's high.
"[It's] the beginning of the end of ultra-loose monetary policy in the West," says the latest Metal Matters note from bullion bank Scotia Mocatta.
"Whereas tighter monetary policy in Asia has reined in growth, in the West it is likely to have a larger impact on the abundant liquidity that institutional investors have had access to...[But]given the regional issues still facing the global economy, which include sovereign debt, massive budget deficits, raised geopolitical unrest, currency debasement and inflation, gold is likely to remain sought after by a wide range of investors."
"Gold is simply pricing sovereign default risk, it still remains a big issue," said Jeffrey Currie, head of commodity research at Goldman Sachs in London, in an interview with Bloomberg Television on Friday.
"There's a lot of concern over the end of QE [quantitative easing] and noise of QE3, so that kind of risk will continue to support Gold Prices."
Federal Reserve Bank of Atlanta president Dennis Lockhart said on Sunday that the Fed should not begin the exit from stimulus until the recovery is "more clearly sustainable".
"The markets seem to be accepting the view that inflation has not risen to a level that will be persistent for the longer term."
Back in Monday's action, the Euro currency hit a six-week low vs. the Dollar this morning amid fears that the arrest of IMF chief Dominique Strauss-Kahn on sexual assault charges in New York could impact talks about the bail-out packages given to Portugal and Greece.
The Euro has now lost nearly 5% against the Dollar in the last three weeks.
The Euro Gold Price today held tight in a range around €34,040 per kilo (€1059 per ounce), some 1.6% below its all-time high of late Dec.
The Pound Sterling Gold Price also held steady, trading in a range around £923 per ounce – some 2.0% off early May's record high.
"Core inflation is going up [and] the worrying thing is that second-round effects are really taking place," said Carsten Brzeski, economist at ING bank, after this morning's European Union statistics confirmed April inflation of 2.8% year-on-year – up from 2.7% in March.
Core inflation, which strips out energy and whole food costs, rose to 1.8%.
"This is a clear signal we will get more rate hikes," believes Brzeski.
Last week's drop in the Gold Price through $1500 was preceded by a drop in speculative betting in Gold Futures and options, new figures from the US Commodities and Futures Trading Commission show.
Tuesday saw the net long position of bullish minus bearish bets held by non-industry players in Gold Futures fall by 9% from a week earlier – down by the equivalent to 79 tonnes of Gold Bullion to a two-month low.
"Although the fall in gold speculative longs was substantial, given that there were only minimal additions to speculative shorts, we are still reluctant to take this as a signal of a market that has turned bearish on gold," say Walter de Wet and Marc Ground, commodities research strategists at Standard Bank here in London.
Short term, "People are buying gold on weakness," reckons Martin Murenbeeld, chief economist at Toronto-based Dundee Wealth, which manages $85 billion.
"We're going to find that the US economy is not very strong," he said. "A low interest-rate environment will remain for possibly all of 2012. The Dollar goes down."
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