Gold and Silver Prices in the wholesale market both dropped in London on Tuesday, pulling back 2.0% and 3.5% from yesterday's early highs as world stock markets fell and the US Dollar rose.

The Greek government took advantage of a sharp drop in its borrowing costs to raise 30% more debt than planned, borrowing €1.56 billion ($2bn) in short-term bills after the weekend announcement of joint IMF and Eurozone aid "if needed".

Greece still faces "significant execution risk" in cutting its huge budget deficit, however, Moody's analyst Sarah Carlson told Bloomberg by phone.

The Euro held more than 1¢ below Monday morning's early peak. The Gold Price in Euros turned higher from €845 an ounce, a 3-session low.

"The announcement by Moodys should generate some additional safe-haven buying in gold once this correction is over," says a note from Japanese metal group Mitsui's London office.

"Long-term uncertainty remains in the market," agrees Filippo Finocchi at Italian bullion dealer Italpreziosi today.

"We could still see the Dollar as the primary beneficiary of risk aversion [and] recommend extreme caution in taking positions."

"The latest gains [in Gold] on Friday and early Monday morning in Asia were due mainly to technical buying," reckons one Tokyo researcher quoted by Reuters. "Such a rally usually paves the way for a technical correction."

On the political front on Tuesday, "Renminbi appreciation would neither balance Sino-US trade, nor solve the unemployment problem in the United States," said China's president Hu Jintao to US president Barack Obama in Beijing today, according to reports in the Chinese press.

Reform of the currency peg – which locks the Chinese Yuan at 6.8256 per Dollar – will only come to assist China's "economic and social development needs", Hu told Obama.

Twelve out of 19 forex analysts surveyed by Bloomberg News, however, reckon Beijing may allow the Yuan to rise vs. the Dollar before the end of June, so as to curb domestic inflation.

Analysts from Bank of China and the China Construction Bank were amongst 11 of the 19 experts to rule out a one-off revaluation.

The world's No.1 Gold Mining nation, China is also the world's second-largest consumer market for gold.

With local interest rates now well below zero after inflation so as to maintain the Yuan-Dollar peg, China's ICBC – the world's largest bank by client-base and profits – last week signed a joint-venture agreement with gold-marketing group the World Gold Council.

"We think ongoing concerns over sovereign debt and a possible revaluation of the Chinese Yuan could boost demand for gold," says the latest Metals Matters report from bullion bank Scotia Mocatta.

"While we continue to expect Gold Prices to move higher this year, higher US real [interest] rates off the back of stronger economic activity will likely reduce some of that upside," says the latest Commodity Watch from investment-bank Goldman Sachs' London and New York analysts.

Goldman Sachs is therefore cutting its 2010 average Gold Price forecast to $1165 an ounce, but raising its 2011 target to $1350.

"While we expect Gold Prices to increase in 2010 and 2011, the rising risk of tightening monetary policy suggests this is a good time for gold producers to begin scaled up hedging of forward production," advises the bank, "particularly for calendar 2011 and beyond."

Government bonds were little changed worldwide early Tuesday as Asian and European stock markets ticked lower from new multi-month highs.

The price of crude oil also slipped after the International Energy Agency said prices above $80 a barrel could threaten global economic recovery.

US aluminum producer Alcoa Inc. kicked off the first-quarter earnings season on Wall Street today by announcing worse-than-expected losses of $201 million.

Silver Prices dipped to $18.05 an ounce, down 3.5% from Monday's 12-week high of $18.68.

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