Gold Prices dipped from a two-day high early Thursday, recording an AM Fix in London of $910.85 – some $3 per ounce above the February average so far – as Asian stock markets closed sharply higher.

Far Eastern equities leapt on news that Japan's economy grew twice-as-fast as expected at the end of 2007, led by strong exports to other Asian economies.

In China's booming Gold Market, net investment demand from private individuals rose 68% to a record 24 tonnes in 2007, reported the World Gold Council yesterday.

Combined with a 20% increase in gold jewelry sales in the fourth quarter alone, that made the world's fastest-growing economy the world No.2 for retail gold sales.

"Gold continues in a consolidation pattern," says today's market note from Mitsui, "with the range at $880 to $935. A break of either side should give short term direction."

"We suspect the Gold Market may soon tire if a new high is not achieved," agrees today's analysis from Scotia Mocatta, the London bullion bank, "exposing gold to greater profit-taking.

"With the US Dollar exhibiting greater stability – and the market for government inflation-protected securities not currently suggestive of a US inflationary scare that would typically benefit the precious metal – there are reasons to be cautious."

The threat of a real "inflationary scare" continued to mount early Thursday, however, as crude oil prices rose 0.7%, close to $94 per barrel, on the news that Japan – the world's third-largest oil consumer – grew its economy by 3.7% between Oct. and Dec.

Aluminum prices at the London Metals Exchange jumped 4% to a seven-month high – the sharpest one-day gain since Sept. 2006 – after China's largest producer, Chalco, said it will take "months" to restore storm-hit smelting capacity.

Aluminum output in South Africa may also be hit by a complete energy buy-back of smelting power supplies by Eskom, the state-owned utility, according to a Reuters report.

Struggling to fix the country's month-long power crisis, Eskom has now restored only 90% of the mining industry's requirement, denting gold output and pushing platinum prices above $2,000 per ounce for the second day running early Thursday.

Formerly the world's No.1 gold producer, South Africa saw gold output drop 6.5% in 2007. AngloGold Ashanti, the country's top producer, now fears a $363 million shortfall in its 2008 production.

In the platinum market – where South Africa remains the world No.1 – "the supply-demand balance was already extremely tight," says Frederic Panizzutti at MKS Finance, the precious metals financier. "Additional shortages are going to tighten the market further."

Yukuji Sonoda of Daiichi Commodities in Tokyo reports that Japanese car-makers are "unwillingly" building six-month stockpiles of platinum for use in catalytic converters.

Elsewhere, the Euro rose above $1.4600 for the first time in a week, capping the Gold Price in Euros below €625 per ounce.

For British investors wanting to Buy Gold today, the price held beneath £463 per ounce as the Pound Sterling rose above $1.9700 to the Dollar.

Sterling has now recovered half of this month's 3% losses, despite surging consumer and industrial price inflation and "a marked slowing in growth in the near term" forecast by the Bank of England yesterday.

Back in the Gold Investment market, "I think in the Chinese market tends to view the fluctuation in Gold Prices quite differently from those in the Indian market," said Matt Graydon of the World Gold Council to MoneyWeb's Power Hour radio show in South Africa last night.

Indian consumers – sensitive as much to volatility as strong prices – slashed their Gold Buying at the end of last year, cutting their fourth-quarter purchases by 64% in volume terms on the WGC's analysis.

That took growth in the world's No.1 market from 16% year-on-year at the end of Sept. to just 7% for 2007 as a whole.

"The outlook while Gold Prices are high is not positive for the jewelry sector as a whole," believes Graydon, "but the Chinese market at the moment is very, very strong."

Worldwide gold investment demand hit a record $8 billion (net) over the last three months of last year, the WGC also reports. In tonnage terms, however, investors reduced their Gold Buying by 39% from the fourth-quarter of 2006. Industrial gold demand meantime rose 2% to a total of 465 tonnes for 2007.

The fastest-growing gold jewelry market last year was Russia, which saw fourth-quarter demand rise by 25% in US Dollar terms and by 11% in volume to 77 tonnes.

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