Gold has emerged largely unscathed from the sharp selloff that's gripped markets in recent weeks, helped by a combination of factors from physical demand from the world's largest consumers India and China, to a slowdown in selling by investors, analysts say.
While almost every other asset class from currencies to equities and bonds succumbed to the market rout that started in late May, bullion has managed to stay in a trading range of $1380-$1410.
"Selling abated a little as the opportunity cost decreased. Both the Dow and Nikkei started to give up their gains, so there was less need to sell gold in order to buy equities," said Warren Gilman, chairman & CEO of investment firm CEF Holdings told CNBC.
On the physical demand front, buying from India and China has also helped to offset the selling by exchange traded funds (ETFs). Gold and silver imports into India, for example, surged nearly 90 percent in May from the same period a year earlier, spurred by lower prices and festive demand.
Still, market watchers warn that the relative calm seen in this asset class may not last for long, and this week's meeting by the Federal Open Market Committee could be a game changer.
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Investors are on the lookout for further hints of when the U.S. central bank plans to scale back its bond buying program, which has been supportive of the precious metal in the recent years. A hawkish signal from Fed Chairman Ben Bernanke could bring about renewed selling in the previous metal.
"If the Fed is going to cut back on asset purchases and if at the same time, there's no inflation in the system, there's no investor demand for gold," said Uwe Parpart, managing director and head of research at Reorient Financial Markets.
"Gold is going to go down. There's no question about it," he added.
Erik Wytenus, foreign exchange and commodities at JPMorgan Private Bank agrees that as the U.S. approaches the end of its easing cycle, it will be negative for gold prices.
"One of the most tried and true rules of investing is: do not fight central banks. We're getting to a state of affairs where you've got all this obsession about tapering...that is supporting U.S. yields, the U.S. dollar and that's going to be a headwind for the gold price," he said.
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When the dollar strengthens, gold futures, which are traded in dollars, become more expensive for investors who use other currencies to buy the yellow metal.
And with stability emerging in the euro zone, Wytenus said demand from "talk risk holders of gold" will decline.
Societe Generale on Tuesday downgraded its fourth quarter forecast for gold prices this year to $1,200 an ounce from $1,375, citing a "paradigm shift" in investor attitude towards gold resulting from the recent dramatic selloff in April and the prospect of Fed tapering.
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"ETF gold selling has averaged about 100 tons per month since the April sell-off. We expect continued ETF selling to exceed higher demand for jewelry, bars and coins," said Michael Haigh, head of commodities research at Societe Generale.
"While production cost concerns may slow the price decline below $1,200, this factor is unlikely to provide firm support until we get closer to $1,000," he added. The average cost of mining gold is estimated at around $1,200 an ounce, according to the bank.
By CNBC's Ansuya Harjani