Gold prices hit a one-month high at $1,640 per ounce ahead of Wednesday's US session – up more than 7% from May's low – while stocks, commodities and the euro also ticked higher and major government bond prices fell, with London markets open again after a two-day public holiday.
Silver prices climbed to over $29.50 an ounce – a 3.3% gain on the week so far, and a near 10% rise from last month's low.
"[Gold] is consolidating last Friday's aggressive move from $1546 to $1629," says the latest technical analysis from bullion bank Scotia Mocatta.
Barclays Research meantime note that gold prices have broken above its "2012 bear channel", adding that gold has hit "strong demand [in the] "1522-33 area" on downswings over the past 12 months.
"This week there will be plenty of opportunities for gold to either pass the safe haven test or reverse back into its old risk-on shell," added a note from UBS this morning
The European Central Bank announced its latest monetary policy decision on Wednesday, which saw the ECB leave its main interest rate on hold at 1%.
Following Wednesday's ECB decision and press conference, the Bank of England makes its latest policy announcement on Thursday, shortly followed by US Federal Reserve chairman Ben Bernanke's testimony to Congress.
Back here in Europe, "the ECB might want to wait for further corroborating data to conclude that its second-half-of-the-year recovery expectations are challenged," reckons Royal Bank of Scotland economist Silvio Peruzzo.
"The problem in the euro zone," adds Steve Barrow, currency analyst at Standard Bank in London, "much more than the US and UK, is that the banking sector is broken. As it fights for its survival, so credit growth to firms and individuals is sacrificed."
"European institutions must open up and help us facilitate bank recapitalizations," said Spanish Treasury minister Cristobal Montoro yesterday.
"The market is no longer open. The risk premium is telling us that Spain as a state has a problem accessing the market when we need to refinance our debt."
Yields on 10-Year Spanish government bonds breached 6.7% last week, and despite easing since remain above 6%.
European leaders agreed last July that the European Financial Stability Facility, the euro zone's temporary bailout fund set up two years ago, should be able to make loans for the purposes of bank recapitalization, although such loans would go to sovereign governments rather than to banks directly.
Ratings agency Moody's meantime cut its credit rating for six German banks on Wednesday, including Commerzbank, while it also cut its rating for the German arm of Italian bank UniCredit. Three Austrian banks also had their ratings cut.
"Today's rating actions are driven by the increased risk of further shocks emanating from the Euro area debt crisis in combination with the banks' limited loss-absorption capacity," said a Moody's statement.
The European Commission today announced its plans for a resolution regime to deal with failing banks, including "early supervisory intervention" and powers to sell all or parts of banks deemed to be failing.
In addition, the Commission states, "if market funding is not available...supplementary funding will be provided by resolution funds which will raise contributions from banks proportionate to their liabilities and risk profiles."
Opposing the so-called banking union, one German politician today described it as "a new, admittedly creative, way to tap German solvency."
"Our savers cannot be liable [for other countries' banks]," added another, Michael Fuchs, who is a member of Chancellor Merkel's CDU party.
Following a conference call on Tuesday, G7 leaders said they will coordinate their response to the euro-zone crisis.
"[They] said they will speed up their efforts to resolve those problems, which was encouraging to us," said Japanese finance minister Jun Azumi, adding that "Japan is ready to provide support if there is anything we can do."
The Bank of Japan was one of six central banks that took part in a coordinated action on Nov. 30 last year, when the cost of overnight dollar funding to banks was cut by 50 basis points (0.5 percentage points).
Despite the ongoing crisis, the euro rallied this morning, at one point trading above $1.25, 1.7% up on last week's two-year low.
Euro gold prices meantime hit their highest levels since the end of February, rising to €42,290 per kilogram (€1315 per ounce).
The gold price in euros has only been higher than €42,000 kilograms on 36 previous trading days, first in September 2011 and then again in February of this year.
Over in the US, the so-called speculative net long position held by gold futures and options traders on the Comex fell just over 5% in the week ended last Tuesday, data published Friday by the Commodity Futures Trading Commission show.
The spec net long – defined as the difference between bullish and bearish contracts held by noncommercial traders, as opposed to industry players such as gold mining companies – fell by the equivalent of 17.2 tonnes of gold bullion, hitting its lowest level since December 2008.
Since last Tuesday, gold prices have rallied back above $1600 an ounce, following Friday's disappointing nonfarm payrolls report.
"We are positive on gold," says Nikos Kavalis, global banking and markets analyst at RBS.
"To regain traction [though], we need the professionals to go back in."
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