Gold had a rare banner day in trading markets on Tuesday, as a combination of short covering and hopes for more central bank easing sent the yellow metal to a two week high. Still, traders aren't sure what's next for bullion, which has taken a battering since the start of 2013.
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The price of spot gold hit an intraday high of $1,597, up as much as 1.2 percent, its highest level since February 28. Spot gold managed to break above the $1,560 and $1,585 range in which had been confined since the start of March. U.S. gold for April delivery were up one percent at $1,596.
On the trading floors in both Chicago and New York, however, it seemed that some professional traders were divided on the significance of gold's one-day surge. Given how bullion has been in a swoon since late last year, market players aren't sure what move gold might make next, or how they should trade it.
Anthony Grisanti, a commodities trading veteran on the New York Mercantile Exchange's trading floor, is bearish on gold for a few reasons. Grisanti argued the ECB's money printing will only weaken the euro, thereby strengthening the U.S. dollar.
Typically, the price of gold and the U.S. dollar trade inversely from one another, so a stronger dollar would hurt gold prices.
From a technical standpoint, Grisanti said gold is facing "huge resistance" at the $1,597 level. He doesn't see any catalysts that would push it past that point. To trade it, Grisanti plans to sell the April gold futures contract at $1,595 with a target of $1,572 and a stop at $1,604.
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Pro trader Rich Ilczyszyn of iiTrader thinks gold has become more attractive from a risk-reward standpoint, being that it failed to set fresh lows. As gold roared past the $1,590 level, it took out stops above $1,585/88 an ounce.
"Although the dollar is slightly higher and the euro slightly lower, gold has held a small range in the last several sessions and is attempting to make a move," Ilczyszyn said.
"If gold can hold value against $1,580 and closing above $1,574, the more likely stops will be run and gold can leg up to test $1,605," Ilczyszyn added. "If gold can approach there that is when shorts will need to cover and the market can get bullish momentum."
Even if gold closes below $1,574, Ilczyszyn said the line in the sand remains $1,560. He recommends buying the first re-test of the $1,585/5 level, but only with a stop order.
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At the Chicago Mercantile Exchange, trader Jim Iuorio said he's also bullish on gold — at least in the short-term. There are a lot of gold shorts right now, but they can be squeezed out, he warned.
"How quickly gold reacted this morning to very mild news out of currency markets makes me think it's due for a short-term pop," Iuorio said on CNBC's "Futures Now," adding he thinks gold could soon soar to the $1,617 level.
Read on for 10 Things You Need to Know to Trade Futures