Prices to buy gold rose Tuesday morning as dealers in London – heart of the world's wholesale bullion market – returned from the New Year's holiday.

Gold recovered almost all of last week's 5% drop before edging back to $1,592 per ounce – a price first reached in July 2011, when investment demand to buy gold rose sharply as the Eurozone debt crisis worsened and the United States faced its first-ever downgrade of credit worthiness from a major ratings agency.

Tokyo and Shanghai today remained closed for more New Year holidays, but other Asian markets led Europe in rising some 1% on average after new data showed a strong rebound in China's non-manufacturing output in December.

Base metals rallied this morning together with the Euro currency, which rose back above the $1.30 level first crossed in late 2004.

Silver bullion also rose, gaining more than 10% from last Thursday's near 12-month low to trade at $28.87 per ounce.

Crude oil held near $100 per barrel, supported by a "risk premium" according to Commerzbank analysts, as the French foreign minister called for Europe to follow the United States in tightening sanctions against Iran over its nuclear development program.

"Gold is still trading on risk appetite, rather than acting as a safe haven," Reuters quotes Ong Yi Ling at Phillip Futures in Singapore.

"Global central bank reserve accumulation has slowed," says the latest note from Morgan Stanley's currency strategists, "pointing to a cyclical slowdown in reserve diversification, leaving the Euro and other alternative reserve currencies vulnerable.

"We believe the US dollar will come back in favor...against the backdrop of renewed challenges to risk-taking."

"Gold is a unique hedge against the debasement of all fiat currencies," says Douglas Hepworth at Gresham Investment Management, which holds $1 billion of its $13bn commodities portfolio in gold, speaking to the Financial Times.

"However in a period where you're not having stagflation but stagnation...it will do badly."

In the 17-nation euro zone, "The money multiplier has collapsed," says Société Générale's interest-rate strategy team, pointing to last year's 46% jump in European Central Bank money holdings compared with just 1.7% growth in private-sector bank loans.

"In other words the ECB is printing money but the transmission to the real economy is extremely weak."

New debt issuance by euro-zone member states will total €740 billion in 2012 according to Swiss bank UBS.

That would be equal to almost 6% of gross domestic product across the 331-million citizen region.

Speculators in the currency market last week raised their betting against the euro to record levels, according to data from US regulator the Commodity Futures Trading Commission.

The "net long" position of bullish minus bearish bets in US gold futures and options meantime fell back to is lowest level since late 2008, down by 3.5% to the equivalent of 422 tonnes.

Including private investors trading gold futures and options, the speculative net long position has almost halved from its record peak of early August.

The gold price has lost 4.1% since then.

"As a percentage of open interest," says today's note from Standard Bank in London, "net speculative length is currently around 21.8%. This is well below last year’s average of 31.8%, indicating a market that is far from overstretched."

"Since the [gold price] peak on September 9th," says the latest technical analysis from bullion bank Scotia Mocatta in New York, "we have had lower highs and lower lows, and thus gold has entered a downtrend.

"[But] while the long-term uptrend off the October 2008 low was breached during [last] week, it held on a closing basis on the weekly chart. Trendline support sits at $1,538."

Gold investment holdings in the world's exchange-traded trust funds crept 0.6% lower in the week ending Dec. 27th, according to analysis from the VM Group here in London, compared with a 2.7% drop in the metal's price.

Latest data from India – the world's heaviest consumer of gold, which has no domestic mine output – meantime said Monday that imports of gold bullion fell by 56% year-on-year in the last three months of 2011, dropping to 125 tonnes and pulling full-year imports some 8% lower compared with 2010.

"Imports were very bad in October to December," said Prithviraj Kothari, president of the Bombay Bullion Association, in an interview yesterday.

"People were even selling gold in November" – typically a strong season to buy gold during the Hindu festival of Diwali – because for some, "it was an investment," says Kothari, rather than the religious and social necessity more typically associated with India's world-leading demand.

After raising its key interest rate 13 times since March, the Reserve Bank of India held rates at 8.5% in December, following the worst drop in manufacturing output since March 2009.

Price inflation in consumer goods was last seen falling slightly to 9.3% on the official measure in November.