Fed officials have assured markets that though they could start winding down the bond purchases by year-end, they will rely on economic data to determine their asset purchases and they have no intention of raising the Federal funds target rate anytime soon.
Traders said gold gained momentum after piercing $1,300, a level it had failed to break above over the last several weeks. Large speculative short positions also have been built up in gold as it declined. The Commodity Futures Trading Commission's latest weekly data show that funds' gold net-long positions rose 48 percent, increasing for the first time since the start of June as traders covered short positions.
Net longs also rose for silver, which gained 5.4 percent Monday.
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Gero at RBC said there has been strong buying interest in gold from China and Japan but that India, the biggest market, is still sidelined because of new taxes on gold and a weak currency.
On Monday, the Reserve Bank of India moved to tighten gold imports again by restricting bank holdings of the metal. It asked all nominated banks and agencies to export at least a fifth of every lot of imported gold in all forms and to make it available only to local jewelers. India has been struggling to contain its record current account deficit.
"The fact that we settled above the April 15 low of $1,321 is bullish," said Kevin Grady, president of Phoenix Futures and Options. "It should attract some more buying. The $1,335 we're sitting on is a very key area."
Wyckoff said the next upside target is $1,350.
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"I think the gold market today gained some good upside technical momentum," he said. "The price action negated a 9.5-month-old down trend on the daily chart. Also, we have a fledgling 3-week-old uptrend," he added. "It's a near-term bottom. We'll have to wait and see if it's any kind of a longer-term bottom. Certainly the bulls have gained important near-term technical momentum."