Gold and physical Silver Prices fell hard vs. the Dollar in London on Thursday, dropping to 1-week lows - as did the Euro currency - after the Moody's rating agency downgraded Spain's government debt and China reported a surprise trade deficit for Feb.

Brent crude oil dropped over $2 per barrel. World stock markets lost more than 1.2%.

Government bonds including weaker peripheral Europe rose in price, nudging interest rates lower even on Spanish debt, where 10-year yields ticked back down to 5.50%.

Uncertainty over Euro negative news is outweighing general financial stress, which should be gold positive, says one London dealing desk.

There has been no change in physical [Gold] market activity, says James Zhang at Standard Bank, which remains lacklustre even though prices have moved lower.

With no news on developments in the Middle East-North Africa region, most investors are waiting on the sidelines.

France today became the first country to recognize Libya's opposition party, the NLC, as the oil-producer state's legitimate government.

The International Red Cross today called the on-going conflict a civil war, while Nato chiefs planned a meeting to discuss enforcing a 'no-fly zone' above Libya to prevent further air strikes by Gaddafi loyalists.

Over in Beijing, meantime, the People's Republic posted a trade deficit equal to $7.3 billion for last month, new customs data showed - the biggest deficit in 7 years.

It could be just a blip, says a note from IHS Global Insight in London, with many other analysts pointing to Feb.'s long Chinese New Year holidays and gift-giving festivities.

[But] China would have run a surplus of $16 billion over the first two months of the year if commodity prices were unchanged from a year ago, counters Mark Williams, senior economist at Capital Economics.

A net importer of Gold despite now being the world's No.1 mining producer, China saw 200 tonnes of demand during Jan. and Feb. according to an estimate from Swiss bank and bullion market-maker UBS.

Gold imports totaled 209 tonnes between Jan. and Oct. last year, the Shanghai Gold Exchange said in Dec. - a rise of more than four times from the same period in 2009.

In Silver Bullion, China exported a net 1,075 tonnes as recently as 2006, but it imported nearly 3 times that much in the first eleven months of 2010 alone, according to customs' data.

Changes in net Chinese imports appear to be closely correlated to longer-term price movements in the silver market, noted David Jollie at Mitsui recently.

Back in Thursday's action, There are short-term traders and investors who want to reap profits after the rally, said Seoul-based trader Chae Un Soo at KEB Futures to Bloomberg today.

Losses will be limited as there's an enormous interest in gold and precious metals.

Asian trading saw the market [run] out of ideas to push the metals either way, says a Hong Kong dealer in a note.

Silver Prices in London today bounced higher from $35.12 per ounce - some 4.5% below Monday's new 31-year high.

The Gold Price bottomed at $1418 - just shy of the then-peak prices hit 3 times between Nov. and Dec. last year, and 1.9% below this week's new all-time high.

Versus the Pound Sterling and Eurozone single currency, in contrast, both gold and silver were unchanged for the week by lunchtime today.

Here in London, the Bank of England voted on Thursday to leave UK base rates unchanged, pegging them at a record low of 0.50% for the 25th month in succession - the longest stretch of unchanged rates since the two decades of 2.00% starting in the depths of the 1930s' Great Depression.

A week after downgrading Greek government debt yet again, meantime, the Moody's ratings agency this morning joined its rival Standard & Poor's by nudging Spain lower, citing  high funding requirements, not only for the sovereign but also for the regional governments and the banks, as well as the as-yet unknown cost of refinancing the Spanish banking sector.

We are surprised that Moody's has taken this decision before knowing the details of the [Bank of Spain's] report on the recapitalization of the Spanish financial sector, said Treasury director Soledad Nunez to Reuters.

Buying Gold or physical Silver Bullion today? Don't pay one penny more than you need just to get less than you want. Go to BullionVault instead...