Gold and Silver Bullion edged 0.7% below yesterday's two-week highs in London on Wednesday morning, trading at $1207 and $18.17 per ounce respectively as European stock markets fell for the first session in seven.

The US Dollar rallied from its lowest Euro level in nine weeks, but slipped from a near two-week high vs. the Japanese Yen at ¥89.10.

Crude oil fell back through $77 per barrel after new data showed US stock-pile inventories rising sharply.

US Treasury bonds rose, but German Bunds and UK gilts slipped, nudging 10-year British bond yields up to 3.40% – fully 160 basis points below the latest reading of retail-price inflation.

"Yet again not much change for gold on Tuesday," says technical analyst Phil Smith for Reuters in Beijing," with the sideways move continuing and the signals mixed.

"Quite a nice pullback continues for gold after the new highs set in May and June."

"Every single time gold pulls back, a new floor is established and that is always higher than the previous one," said a European trader to Reuters earlier.

"I would say $1,200 an ounce is the key level [for] dip buying."

"Gold's underlying appeal as a currency alternative and a hedge against risks is deep-rooted," the newswire also quotes Koichiro Kamei at Tokyo's Market Strategy Institute.

"[That appeal] will stay over the longer term, and there is nothing to threaten it imminently."

Following Greece's successful return to the debt markets with a €1.65 billion bond auction on Tuesday, the European Union also gave Estonia the go-ahead to join the 350-million citizen Euro currency zone from Jan. 1st next year.

The Baltic state's government debt is the lowest in the 27-nation European Union, equal to 7.2% of economic output. Last year's government budget deficit was just 1.7% of GDP.

The EU averages in 2009 were 73.6% and 6.8%.

"There is a growing risk [however] that Estonia might not fulfill the Maastricht criterion on inflation," caution analysts at Denmark's Danske Bank.

Paolo Pizzoli at ING Bank meantime warns that the Greek debt auction "should not be over-emphasized.

"The real test for Greece will come when it starts offering bonds with maturities going beyond the likely exhaustion of the €110bn [EU-IMF rescue] package, expected in the first part of 2012."

Physical gold priced in Euros today slipped back once again in the wholesale market, edging down towards Tuesday's overnight low at €950 an ounce (€30,540 per kilo).

British investors wanting to Buy Gold saw the price slip below £795 an ounce for the first time this week, dropping 1.5% from last Friday's finish and trading almost 9% below May's record high at £871.

A new study from Britain's official data agency said Wednesday that public-sector debt could in fact be nearer £4 trillion ($6trn) than the current £903bn headline, thanks to banking-sector support and unfunded pension liabilities.

Madrid's El Economista newspaper meantime reports that 400 of Spain's 8,000 local councils have stopped paying electricity, water and telephone bills after tax receipts dropped 30% on falling real-estate transactions.

"Much of southern Europe is facing a debt crisis," says Michael Pettis, finance professor at Peking University's Guanghua School of Management, writing at The Economist.

"The historical precedents are pretty clear. Growth will not return until the debt is restructured to include partial debt forgiveness. [But] any meaningful debt forgiveness is likely to push the European banking system into insolvency, so the fiction will be maintained for many years...that these countries are merely facing temporary liquidity problems."

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