The wholesale cost of buying silver fell to around $34.50/oz this morning—1.3% off Friday's high—as stocks and industrial commodities also edged lower and major government bond prices rose.
"Precious metals are for the most part defending the gains they have made in recent days," says Commerzbank in its morning commodities note.
"Gold is still pretty bullish this week," agrees Phillip Futures analyst Lynette Tan in Singapore.
"I think gold prices will remain firm and probably test the [$1,790/oz] high set in February...buyers are still buying gold, but it seems that profit taking may occur later."
On New York's Comex, the so-called speculative net long position across all gold futures and options traders—based on the difference between bullish and bearish contracts—rose to its highest level since February last Tuesday, according to weekly data published each Friday by the Commodity Futures Trading Commission.
The world's largest gold ETF SPDR Gold Shares (GLD) meantime saw its bullion holdings climb above 1,300 tonnes Friday for the first time since August last year.
"We believe the macroeconomic environment for gold is turning more constructive," says a report from Deutsche Bank.
"We expect that the growth in supply of fiat currencies is an important driver, the low interest rate environment is likely to continue to enhance gold's attractiveness given the negligible opportunity cost."
Since the start of the month, both the European Central Bank and the Federal Reserve have announced open-ended stimulus measures.
The ECB said it will buy sovereign bonds on the open market "with no ex ante quantitative limits," while the Fed said it will buy $40 billion of mortgage-backed securities each month until it sees "substantial" improvement in the U.S. labor market, a move generally being recognized as a third round of quantitative easing (QE3).
"People will see commodities as something they want to hold, because they see these moves as inflationary," says John Stephenson, portfolio manager at First Asset Investment Management in Toronto.
"It's hugely bullish in the short run, now that all of the central banks seem to be singing from the same hymnal."
"The precious (metals) complex looks rather good medium to long term," adds a note from Swiss refiner MKS.
"But after a month and a half rise without any correction, a violent crash for both gold and silver could happen."
Since the ECB announced its plan on Sept. 6, the Euro has gained around 4% against the dollars, breaching $1.30 last week for the first time since May following the Fed QE3 announcement.
"While we can easily see the euro rising further in the next few weeks, to $1.35 or so, we still hold to a $1.15 target over the next 6-12 months," says this morning's note from Steve Barrow, head of G10 research at Standard Bank.
Despite recent euro strength however, the cost of buying gold in euros remained within 2% of its spot market all-time high during Monday morning's trading.
European finance ministers meeting in Cyprus over the weekend agreed to postpone a decision on whether to grant Greece more time to meet its austerity commitments until late next month.
Decisions on the creation of a single European banking supervisor were also deferred.
France's finance minister meantime has defended plans for a 75% tax rate for those who earn more than €1 million a year.
"It's a strong, patriotic measure," Pierre Moscovici told RTL radio.
"Those that got very rich over the past period can help in a patriotic way to turn around the country. . .Lowering the (national) debt is a necessary battle to have our sovereignty from the markets. I don't want France to be a prisoner of its debt."
French economic growth is expected to remain "considerably below 1%" next year, Bank of France governor Christian Noyer says in an interview published in Les Echos Monday.
The United States meantime is to complain to the World Trade Organization about China subsidizing car and car part manufacturing, the <i>Financial Times</i> reports.
"The key principle at stake is that China must play by the rules of the global trading system," a White House spokesman said.
"When it does not, the Obama administration will take action to ensure that American businesses and workers are competing on a level playing field."
Ben Traynor
BullionVault
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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+.
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