Spot gold, which sank to $1,175.5 at one stage, its cheapest since May 25, was last seen at $1,191.80/1,192.30 per ounce, up $7.60. On the charts, the metal is targeting key support at $1,175 and $1,169, while resistance is set at seven-day moving average of $1,198 and $1,213.

The gold price dropped below USD$1200 an ounce on low trading volumes and quiet confidence in risk based assets this week.

The short term implications for New Zealand are a decrease in the gold price locally, as the kiwi dollar has risen against the US dollar, adding the doubled benefit of a decrease in metal price and the increase in exchange rate to make this an au ious time for buying gold in NZ dollars. This has already shown with increased buys on our local market as investors take advantage of this dip.

Demand for physical gold has already increased with this drop in price, and has bolstered the US$ spot price from USD$1180 on Tuesday trading to USD$1190 overnight. The Indian market is also seen to be picking up with the gold price perceived to be high.

"At these levels there has been some good physical demand and activity from Asian sector and this should lend some good support to the gold market," one Swiss trader said.

The expectation that the European Banking stress test later this week will be successful has also lent itself to some short term covering buys.