Spot Gold Prices moved in a one-dollar range either side of last night's US close on Friday morning, heading for the seventh weekly gain in eight above $747.50 per ounce.

European stock markets meantime slipped 0.8% by lunchtime in London, following Asia lower after Wall Street dropped 0.5% on Thursday.

"The current rally in Gold Prices is supported by surprisingly strong physical demand," says Wolfgang Wrzesniok-Rossbach in the latest Metals Weekly from Heraeus, the German refining group, "and also by strong demand from investors as well as speculators.

"Both groups focus not so much on the fundamental side, but more on the very strong oil price and on the weak Dollar."

The Dollar held steady at $1.4170 per Euro early Friday – and US government bond prices continued to slip – after President Bush, Treasury-Secretary Paulson and presidential candidate Hillary Clinton all said yesterday that they support a "strong Dollar" policy.

The Euro also failed to rise on stronger-than-forecast Eurozone industrial production – up 4.3% in August from a year earlier. The British Pound slid to a two-week low beneath $2.0250 after a survey in today's Financial Times said house-price growth has slumped by one-half since April.

That move kept the Gold Price in British Pounds around £369 per ounce, more than 1.6% above last week's close. For European investors wanting to Buy Gold Today, the price traded one Euro below yesterday's 17-month high of €529.50.

Gold's two-month surge is also supported on the supply side, notes Wrzesniok-Rossbach at Heraeus. He points both to the decline in South African mining output – down 5.2% in Q3 compared with summer 2006 according to new data out Thursday – plus the "not-so-small likelihood" that central-bank gold sales can only fall from their near-record of the last 12 months.

Signatories to the Central Bank Gold Agreement sold more than 475 tonnes of gold in the year ending 26th Sept., said the Bank for International Settlements on Wednesday. The agreed ceiling was 500 tonnes.

"This number was considerably higher than last year," says Wrzesniok-Rossbach, "when signatories disposed of only 396 tonnes." And now the German Bundesbank says it will sell just 8 tonnes in the new year of the CBGA, enough only to mint commemorative coins.

Yes, the Bundesbank can offer the rest of its 120-tonne allocation to the other 14 members of the Agreement. But the largest central bank in the Eurozone, famed for its anti-inflationary policies in the late 1970s and early '80s, says it will continue to keep hold of 3,414 tonnes of gold bullion.

That hoard is second-only to the US Federal Reserve's reported stock of 8,274 tonnes.

"If the US keeps interest rates at accommodative levels, thereby supporting global liquidity, inflation-related pressures on gold will continue," said Hussein Allidina and Jeremy Friesen for Morgan Stanley in New York yesterday.

Any further interest-rate cuts by the Federal Reserve "could well remove the final obstacle to Gold Prices mounting to $800 an ounce by the end of the year," reckons Gary Mead at Virtual Metals in London.

In the broader commodities market, meanwhile, crude oil rose for the fourth session running as Turkey expelled the US ambassador to Ankara and Prime Minister Erdogan told reporters that Turkish troops may pursue Kurdish separatists into Iraq.

"The northern region of Kurdistan holds some of Iraq's largest oil fields," says Bloomberg.

The prices of zinc, aluminum, lead, tin and nickel also rose at the London Metal Exchange this morning, but copper was unchanged after new data showed stockpiles in Shanghai warehouses rising 23% last week compared with a week earlier.

Chinese copper imports have risen by 41% so far this year from the first 9 months of 2006.

Wheat futures meantime rose for the third day running, after Russia's official state newspaper, Rossiyskaya Gazeta, said the government has imposed a 10% tax on all wheat exports. Barley exports will be taxed at €70 per ton, or 30% of the declared customs value.

The new Russian tariffs will run until the end of April.

Palm oil also rose in Asian trade after soybeans – a substitute in vegetable oil production – surged in anticipation of a crop forecast due from the US Dept. of Agriculture at 12:30 GMT.

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