Gold Prices traded in a tight range around $1537 per ounce Monday morning in London – 2.5% off last month's all-time high – while stocks and commodities fell and US Treasury bonds rose after Eurozone finance ministers delayed a decision on financial aid for Greece.
Silver Prices fell to $35.44 per ounce – a 1.2% drop from last week's close.
"We expect thin trading and uncertainty surrounding Greece's fiscal situation to keep markets prone to volatile price moves," warns Marc Ground, commodities strategist at Standard Bank.
On Friday, Euro Gold Prices made their highest ever weekly close at €34,583 per kilogram (€1075 per ounce). Pound sterling Gold Prices also set a record weekly close at £950 per ounce.
"Jitters about Greek default and the threat of contagion in the Eurozone spurred safe haven buying" on Friday, Swiss precious metals refiner MKS said in a note.
Going forward, "Gold Prices could be supported as the Greek crisis is clearly not over," says Ong Yi Ling, investment analyst at Phillips Futures.
The Eurogroup – which comprises the finance ministers of Eurozone member countries – has delayed a final decision on whether to pay the next tranche of the current Greek bailout.
The €12 billion payment is due next month, but may be halted if Greece cannot guarantee its solvency for the next 12 months. A second bailout designed to enable this is subject to Greece implementing agreed austerity measures.
"Greece must first fulfill the conditions, then we can approve a new program so that payment of the tranche will be possible," German finance minister Wolfgang Schaeuble told radio station Deutschlandfunk on Monday.
"It seems almost inconceivable that the payout won't be made," reckons Steve Barrow, currency strategist at Standard Bank in London.
"We suspect that the IMF, in particular, is putting pressure on here for more efforts from Greece."
The Eurozone "would not be able to control an insolvency", German chancellor Merkel warned members of her Christian Democrat party on Saturday.
"We all lived through Lehman Brothers...I don't want another such threat to emanate from Europe."
The Eurogroup also agreed any new deal should involve "private creditor participation" – meaning Greek bond holders stand to take losses – the group's chairman, Jean-Claude Juncker, told reporters.
"[But it] should really be voluntary because we want to avoid any credit default or credit event."
If Greek bond holders do lose money, "the market will massacre Ireland, Portugal and maybe other countries," reckons Federico Ghizzoni, chief executive at UniCredit.
In Athens, meantime, Greek prime minister George Papandreou faces a confidence vote on Tuesday that could see him ousted from government, while the country faces power shortages after employees at the main power utility announced Monday that they were going on strike.
"Uncertainty is keeping gold well supported at the moment," says Darren Heathcote, head of trading at Investec in Sydney, adding that US economic data due this week could also boost gold's safe haven status.
"The outlook for the housing data remains very weak," adds David Semmens, US economist at Standard Chartered in New York.
"It is becoming increasingly likely that the Fed will be on hold until 2013," reckons Princeton economist Alan Blinder – a former colleague of Federal Reserve chairman Ben Bernanke – predicting that interest rates will remain at 0.25%. The Fed is due to announce its latest rate decision on Wednesday.
Here in London, meantime, a survey by Barclays Capital has found that just 15% of institutional investors expect commodities to be the best performing asset class over the next three months.
"It's global growth that matters for commodities," explains BarCap's head of global foreign exchange Paul Robinson.
"We've seen a range of countries reporting slightly lower growth expectations."
Slower global growth "will prevent a big bull run in equities," Chintan Karnani, director of Insignia Consultants in India, told the Wall Street Journal Monday.
Karnani predicts that gold investors will respond to a slower global economy by buying when Gold Prices dip, rather than exiting positions, adding that lower interest rates in developed markets will maintain upward momentum for gold and silver.