Spot gold prices drifted $3 lower between the AM and PM fixed in London on Wednesday, falling below $670 per ounce as weak US data failed to hurt the Dollar.

The Sterling price of gold dropped to a four-session low just above £336.50.

Against the single European currency, the Euro price of gold sank to a two-month low beneath €492 per ounce.

The fresh dip for investors wanting to buy and sell gold came as the Commerce Dept. reported that construction in April began on 1.53 million new homes in the US – a rise from March that also outstripped Wall Street forecasts by 3%.

"This morning's data does confirm our expectations that the worst of the housing drop is over," said Michael Pond, a New York strategist for Barclays Capital, to Bloomberg earlier.

But the worst is yet to come according to the Commerce Dept.'s more forward-looking release. (How much worse? Find out here...)

Building permits slumped 8.9% over the same period to just 1.43 million – " the fewest since June 1997 and the biggest decline in permits since February of 1990," according to ML-Implode.com.

Sixty-six of the top US subprime lenders have now gone bust since the fall of 2006.

"If the housing industry is continuing to weaken and the inflation data continues to soften, that brings us closer to the Federal Reserve commencing the easing cycle," reckons Phil Orlando, head of equities at Federated Investors in New York.

"That is the brass ring the equity market is looking at."

As Wall Street stock futures rose on hopes of cheaper lending rates, the Dollar itself also gained in the currency markets.

Confirming a dip in the Euro below $1.3575 – just as Nicholas Sarkozy, the new French president, was sworn in – the US currency also gained versus the British Pound.

Previously the darling of central-bank and fixed-income reserve managers, Sterling slipped to $1.9801 after the Bank of England's latest Inflation Report dented hopes of higher UK interest rates ahead. (Get a short history of Sterling's false charms here...)

"Overall, the risks to growth are judged to be balanced," said the quarterly outlook, "while the risks to inflation are balanced in the near term."

Back in the spot gold market, meantime, "we're still really in no-man's land here," reckons John Reade, chief metals analyst at UBS.

"I think there are still a lot of speculative longs out there so I would not be encouraged to buy it here. There's modest physical demand around."

The new two-month low in Euro gold prices comes after the European Central Bank reported a sharp slowdown in official gold bullion sales by its members.

Only one Eurosystem bank sold gold last week, the ECB said Tuesday – and the sale amounted to just €22 million worth of gold.

That's only one ounce in eight compared with average sales during the previous month.

For the "big picture" on central bank gold sales under the CBGA, click here to read on...