Gold rose back above $1100 an ounce in late Asian trade on Thursday, rising further in London's short pre-Christmas session as world stock markets ticked higher together with US Treasury bonds.
Crude oil pushed above $76 per barrel. Base metals and most agricultural commodities also rose.
"Buying has returned to the [Gold] market," said Mitsui's London office this morning in a note.
"Market remained quiet until near [Tokyo's] Tocom close," said its Hong Kong desk. "Buying suddenly emerged and shorts started to cover."
Recovering three-quarters of this week's 3.5% drop against the Dollar, gold also rose sharply for UK investors, breaking £690 an ounce at the London AM Gold Fix.
French, German and Italian buyers saw the price hold beneath €766 an ounce as the Euro jumped to a one-week high of $1.44 on the forex market.
Long-term demand to hold US Dollars "is set to weaken" said a note from Barclays Capital on Thursday, noting that its share of new global central-bank reserves fell below 30% between July and Oct., "unprecedented in a period of US Dollar weakness."
"The Bank of England has bought more gilts over the last nine months than the government has issued," says Julian Callow, also at Barclays Capital.
"This is going twist dramatically the other way in early 2010. Markets know this."
Today 10-year UK gilt yields rose above 4.0% for the first time since July and only the second time since Nov. '08 as prices fell.
"Markets are demanding a risk premium on Sterling," says Callow.
German Bunds offered 3.32% by Europe's early lunchtime close on Thursday.
Ten-year US Treasuries yielded 3.74%.