GOLD OPENED Monday in London just shy of Friday's close at $656 per ounce – more than $4 higher from last week's start against the US Dollar – before rising to a five-session high of $657.80 per ounce.

"Fresh funds are flowing into gold as we're in the early part of the third quarter, although the market is still nervous because of uncertainty over the outlook for global interest rates," said Shuji Sugata at Mitsubishi Futures and Securities to Reuters earlier.

"We've seen solid demand at around $640 by Asian buyers, but the market is seeing some technical resistance around $660."

Tocom gold futures for April '08 rose 0.9% against the Japanese Yen in Tokyo today, ending the session equal to $655 per ounce, while Japan 's Nikkei 225 stock-market index rose 0.7% to its highest close in 7 years.

Both Japanese gold and equity buyers were encouraged by a fresh drop in the Yen, down to a fresh record low versus the Euro and a 15-year low against Sterling .

The US Dollar also slipped, meantime, dropping to $2.0133 per Pound and holding at worse than $1.3620 per Euro. That capped the Sterling price of gold at £325.96 by the Morning Fix in London . For French, Italian and German investors, the gold price in Euros was fixed at €481.92 per ounce.

"The move of currencies continues to set the trend for gold," reckons Sugata at Mitsubishi. "Also the recent strength in oil prices should be positive but gains are pretty much limited so far."

Brent crude oil traded in London dipped this morning from an 11-month high above $75 per barrel. Reuters says that concerns about US fuel inventories, the safety of oil workers in Nigeria , as well as much-needed maintenance in the North Sea persist.

"Crude oil remains at a high level and the Dollar's weakness may continue," says Daniel Or, a precious metals trader for Scotia Mocatta in Hong Kong . "We saw some limited amount of funds buying gold, plus physical buying at the dips now, so gold might go up to $660-$662 initially."

Looking ahead, the most recent Bloomberg survey of gold-market professionals says that 16 out of 31 experts interviewed late last week advised buying gold. Eleven said to sell, and the remaining four were neutral.

"For a second consecutive session on Friday," notes Standard Bank in Johannesburg today, "gold has found support in front of $645. This should continue to provide support in the interim and further bolstered by the 200-day moving average just below it. The metal could run into congestion beneath the $660 level with stronger resistance at $665 capping potential rallies."

Monday sets the pace of a quiet week for economic data. Germany 's industrial output in June matched expectations at 1.9% growth year-on-year. Producer price inflation in the United Kingdom slipped below forecast at 2.1% from a year earlier, but consumer price inflation looks set to rise – despite the Bank of England taking UK interest rates to their highest level in six years – with Premier Foods Plc saying it will raise the price of bread "in the coming weeks" to beat higher wheat prices. Today's Financial Times warns that the recent summer flooding could lead to a 50,000-tonne shortfall in the pea harvest, with meat prices also rising as supplies of animal feed are hit.

Following last week's surprise rise in gold prices after the US non-farm payrolls data, currency and bullion traders will now be watching for the US retail sales, business inventories and sentiment reports due on Friday.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Gold prices live | Latest gold market news
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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