THE PRICE OF spot gold bullion was little changed Thursday morning in London, easing back from $1610 per ounce after yesterday's sharp spike and pullback in what dealers again called "thin" trade ahead of Christmas.

European stock markets reversed Wednesday's drop to trade near two-week highs.

Base metals and energy prices were little changed. Silver bullion traded just shy of $29.50 per ounce in London's professional wholesale market – a level first breached 13 months ago on the way up.

"Thin volume [in spot gold] on the way up proved to be a weakness," says one London dealer, "and as soon as Euro sentiment turned bearish the precious metals followed suit."

"A drying up of liquidity poses a serious risk to all commodities, including gold," says today's commodities note from Standard Bank, noting the "elevated level" of interbank interest rates in Europe.

"There has been a lot of disappointment with gold in the fourth quarter, especially from those who were banking on the metal's safe haven properties, given the escalating situation in Europe," says UBS strategist Edel Tully, quoted by the Financial Times.

Wednesday's 3-year loan of €489 billion from the European Central Bank to 523 commercial lenders was much larger than banking analysts forecast, suggesting greater funding problems in the money market.

"It appears that a very large majority of the large financial institutions participated," says Morgan Stanley's head of European interest-rate strategy, Laurence Mutkin.

"They've taken a lot of their [2012] issuance needs out of the market."

RBS economist Nick Matthews reckons that European banks face some €230 billion of maturing debt between Jan. and March next year.

The Spanish government sold €5.6bn of new debt on Tuesday at a surprise interest-rate of 1.7%, down from 5.1% in November because – some analysts now think – small and mid-sized banks wanted the bonds to offer as collateral to the ECB in yesterday's loan operation.

"Despite all the uncertainty in Europe we are not witnessing a credit event just yet," notes analyst Andrey Kryuchenkov at VTB Capital in London.

"Policy makers are constantly seeking to boost market sentiment and the Euro's credibility."

"If we don't see any change on the policy front, the tight liquidity will extend into the new year," reckons Hou Xinqiang, an analyst at Jinrui Futures in China – adding to Reuters, however, that anticipation of more central-bank action will likely boost commodity and gold prices later in 2012.

China's National Social Security fund last week spent CNY 10 billion ($1.6bn) buying domestic-listed shares, according to Shanghai Securities News.

In the Swiss parliament Wednesday, politicians from all sides demanded that the central bank in Zurich do more to weaken the Franc against the Euro, thought to be hindering Swiss exports after attracting "safe haven" flows throughout the Eurozone debt crisis.

The Swiss National Bank this month repeated its target exchange rate of €1.20. Politicians called for that the Franc's value to be lowered to €1.40, with close "monitoring" of foreign inflows should the Euro crisis flare again.

Parliamentarians voted against a proposal, however, to allow the Swiss National Bank to take its key target interest rate below zero.

The gold price in Swiss Francs has risen 13% from the start of 2011, only just shy of the US Dollar gain, hitting a series of new all-time highs in July and August.