The Gold Price fell to 3-week lows against the Dollar on Friday morning in London, sliding 5.1% from last week's all-time high – and dipping below $1316 an ounce – before steadying as the US currency eased back on the forex market.

Asian and European stock markets were muted, and major-economy bonds were little changed, but US crude oil contracts rose sharply to $81.50 per barrel.

A leaked letter from US Treasury Secretary Tim Geithner called on the G20 summit of leading-economy ministers – now meeting in Seoul, South Korea – to agree trade-balance targets.

"G20 emerging market countries with significantly undervalued currencies...need to allow their exchange rates to adjust fully...to levels consistent with economic fundamentals," adds Geithner, not naming but clearly meaning China.

"Precious metal prices, especially gold and silver, have for some time now benefited from the lack of alternatives available to Chinese savers," says the latest Commodities Weekly from Nic Brown's team at French bank (and London bullion dealer) Natixis.

China's private Gold Bullion demand rose 25% in the second quarter from a year earlier, according to data from the World Gold Council. Chinese households accounted for more than one sixth of total global demand.

After this week's deposit-rate hike to 2.5%, however, and "If the central bank is prepared to raise rates to combat inflation, this would provide Chinese savers with an increasingly attractive alternative to real assets," says Natixis.

But "it would be impossible for China to hold the Yuan at its current level versus the Dollar if Chinese interest rates were to rise far above those in the US," the bank adds.

Latest inflation data said this week that Chinese consumer prices rose 3.6% in the year-to-Oct. Federal Reserve interest rates are currently held at zero.

South Korea meantime moved to revive exchange controls on Friday, raising the idea of a withholding tax on foreign investors in a prevent speculative inflows from the pushing the Won higher against the Dollar.

"As long as the US, Eurozone, Japan and the UK are running loose monetary policy, there is not much policy-makers as a group can do to discourage this fundamental and liquidity-driven trade" into emerging-market currencies, says Marc Chandler, chief strategist at FX dealers Brown Brothers Harriman.

"As a result, it appears that most countries are willing to continue taking unilateral measures."

Back in the precious metals market today, Silver Prices matched and extended gold's drop, losing 5.9% at one point from last week's 30-year high to dip below $22.90 per ounce.

Priced in Euros, Spot Gold fell out the €1000-per-kilo range it had traded in since mid-August, slipping 3.3% on the week to €30,450.

UK investors looking to Buy Gold saw a much smaller discount, however, with spot prices holding around £840 an ounce as the Pound fell hard on the forex market.

Ahead of the G20 summit, the US Dollar meantime held near 15-year lows to the Japanese Yen, and all-time record lows to the Chinese Yuan.

For the first time, says a Dow Jones report, China has allowed the Asian Development Bank and some other international agencies to take their earnings on Yuan-denominated bonds offshore, but only if they're first converted out of the Chinese currency.

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