Gold is likely to trade in a tight range in the next few weeks in the absence of any major triggers. The immediate trigger for gold will be the budget spending in the US which has to be agreed by Congress before October 1 to prevent a government shutdown there.
However, this drama in the US has been seen before and analysts believe a deal will be reached.
On Friday gold jumped 1%, basically on the deal wrangling over the US budget. However, this is unlikely to be a major trigger, as the issue is more likely to be resolved.
Spot gold has closed at $1340 an ounce in trade last.
Gold has lost significant ground this year and is likely to end the year lower for the first time in 12 years.
Strong global economic recovery has pushed equities to new highs, particularly in Europe and the US. There has been a preference towards equities rather then gold. Dealers say that as the ongoing recovery in the US continues, it would be more difficult for gold to rally.
In India the government has also been discouraging the use of gold, as the current account deficit soars. The government has raised duties several times this year to discourage gold and help prevent a slide in the Indian rupee which had hit a historic low earlier this month.
It's unlikely that gold would see a smart recovery anytime soon, unless there is political and economic chaos around the globe.