Spot Gold prices rose for everyone except UK and Australian investors early Tuesday in London, unwinding half of the previous two sessions' 2.9% plunge against the US Dollar as world stock markets rallied with commodities.

"The correlation with stocks is high again," notes Phil Smith for Reuters Technical India.

"The Gold-Dollar correlation is far from normal. The [usual reading] has broken down."

Gold typically moves together vs. the Dollar with the Euro, showing an average correlation with the single currency of +0.51 since the start of 2000.

That figure would read +1.00 if they moved precisely in lock-step, or –1.00 if they moved in opposition.

Amid the Greek deficit crisis of the last eight weeks, the gold-Euro connection has fallen to read just +0.14 on average, its lowest two-month correlation since April '09.

"Precious metals are forming toppish patterns and are to retrace lower in the weeks to come," reckons Axel Rudolph, technical analyst at Commerzbank in Luxembourg.

"Spot Gold [in Dollars] is falling back to its long-term channel support line around $1100."

"An intermediate top is being formed" in the Euro-gold price, says Rudolph.

Gold priced in Euros today pushed higher to €846.50 an ounce, some 2.2% below the record high of two weeks ago.

"The proceeds of [last year's 35-tonne] gold sales were added to the US Dollar portfolio," said the European Central Bank in its annual report yesterday.

Overall, the pan-national central bank's currency portfolio dropped half-a-per-cent of its value from the end of 2008, thanks to the Yen and Dollar losing 5.3% and 3.4% respectively vs. the Euro.

The portion of ECB reserves held in Gold Bullion and special drawing rights – the notional currency created by the International Monetary to replace gold in the late 1960s – rose by 14% against the Euro.

"The objectives for the management of the ECB's foreign reserves are, in order of importance, liquidity, security and return," the annual report said.

Ten years ago, French central banker Hervé Hannoun said in a speech that the rationale for continuing to hold gold – which has risen from 30% to 54% of Eurozone official reserves since then – was "security, liquidity and diversification."

"We should consider buying some more gold, because if we want to develop the Renminbi into an international currency, we must have some scale of gold reserves," said chief economic researcher to the Chinese Communist Party, Li Lianzhong, to a Beiing conference last weekend.

Widely thought to be Buying Gold straight from domestic mine production – now the world's No.1 source of newly mined gold – the People's Bank of China last year announced a 75% increase in the volume of its gold reserves from 2002.

Even as the world's fifth largest official holder, however, China's world-beating foreign currency reserves are so large, gold accounts for just 1.6%, down from 2.0% ten years ago.

"The modification by currency of official reserves is not the interesting development," writes Patrick Artus at French bank Natixis. "The possible change of their structure by asset class is."

Bonds and bank deposits, although deemed 'safe' when inflation is low, provide only "low returns and result in central banks running a major interest rate risk," says Artus, forecasting that – because rates are now so low worldwide – central banks and sovereign wealth funds will "diversify...to the detriment of fixed-income securities " into equities, private equity, plant and capital investments in emerging economies and commodities.

"This will gradually lead to an outperformance by these asset classes in comparison with bonds [and] a financing problem in the United States."

Back in the precious metals market on Tuesday, Silver Prices rallied together with gold, briefly breaking $18 an ounce to regain half of the last two days' losses.

Latest data analyzed by the VM Group in London for Belgium's Fortis Bank shows continued declines in the volume of silver held to back ETF shares.

"Possible explanations are simply profit-taking or a decision by a single large holder to liquidate their positions," says the consultancy.

Versus the Pound today, spot Silver Prices bounced 2.4% from last Friday's 3-week low of £11.46 an ounce.

British investors saw gold struggle below £742 an ounce, however – some 2.5% beneath last month's record – as the Pound rose sharply on news of the worst UK inflation in 20 months.

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