Gold slipped back to yesterday's two-day low in London on Thursday, trading at $1215 an ounce as New York's financial markets opened to find world equities extending Wednesday's sharp rally.

G7 government bonds eased back, pushing the yield offered to new buyers higher from this week's new 2010 lows.

Both the Euro and Sterling slipped from overnight gains vs. the Dollar, holding the price of Gold above €31,900 per kilo and £831 per ounce respectively.

Crude oil crept back above $73 per barrel, unwinding one quarter of the last month's drop.

"Gold selling fizzles out," says Thursday's Commodities Daily from South Africa's Standard Bank.

"Large amounts of scrap and other physical selling in the gold market continued throughout May, [but] it now seem to have run its course.

"The investment market is very bullish," adds analyst Walter de Wet, "and, without the scrap and other gold selling in the physical market, the Gold Price could arguably have been much higher."

"As long as the markets remain concerned about those European countries with credit problems, so Gold Prices will remain supported," agrees the latest commodities market briefing from French bank Natixis.

But "looking at the broader fundamentals, however, the outlook for gold appears to be progressively less robust."

Natixis' analysts cite "heavy" investment in new mine capacity, plus the 8% year-on-year increase in Gold Mining output from the 5 largest producers during the first quarter of this year.

"As for hedging, only one major gold miner retains any sort of forward hedge...So there is limited demand for gold from further dehedging."

AngloGold Ashanti cut its outstanding forward sales of unmined production down to 110 tonnes by the end of March, according to latest data from the VM Group consultancy.

Nine years ago, the global Gold Mining hedge-book peaked above 3,000 tonnes.

"Ultra-low interest rates have supported Gold Prices in recent years," Natixis' weekly report goes on, "by reducing the opportunity cost of holding gold. But with the Bank of Canada joining the Australian, Indian, Chinese and Brazilian central banks in raising interest rates [this week], we would expect G7 interest rates to increase steadily from their current low levels over coming years."

Meantime in California today – and following the decision by CalPERS, the largest US public pension fund, to allocate a chunk of its money to natural resources – executives from the $138bn teachers' pension fund CALSTRs today vote on whether to make a "long-term strategic allocation to commodities."

"Pension fund investment in gold looks very long-term," according to ETFSecurities' Nicholas Brooks.

"The stability of Gold ETF holdings reflects it," he said at a press briefing hosted by the exchange-traded commodities provider in central London this morning.

At the same meeting, "I hope this is the worst investment I make this year," said James Steel of HSBC, quoting a pension-fund manager he recently advised on Buying Gold.

"Because then, the other 95% of his portfolio – in bonds and stocks – would be doing well."

HSBC's Steel acknowledged heavy scrap gold sales, plus weak jewelry demand worldwide. But in the developed-world economies, "Fiscal discipline disappeared a long time ago. This is supporting gold."

What Steel calls the "monetary merry-go-round" of low US bond yields forcing capital flows to emerging economies in a search for better returns – thus forcing those central banks to buy Dollars and so depress Treasury bond yields further – "will come to an end eventually.

"But not this year, and probably not well into 2011."

Base metals led by copper continued to slip as global stock markets rallied on Thursday.

Tokyo's Nikkei index added 3.3%, and Wall Street's S&P 500 rose 0.3% in early trade despite news that private-sector employers added fewer jobs in May than in April.

Official Non-Farm Payroll data is due out Friday.

Silver Prices today ticked lower with gold, standing unchanged from Thursday last week.

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