The price of gold eased on Friday but was on track to post its best weekly gain in three months, with analysts contemplating whether the precious metal is on the brink of a new breakout.
Gold rose 3.3 percent on Thursday, its biggest one-day rise in nine months. It managed to cross the psychologically important $1,300-an-ounce level to hit $1,321. On Friday, the yellow metal was trading around $1,307, having lost $11 in morning trade.
While the Federal Reserve's more-dovish-than-expected tone coupled with escalating tensions in the Middle East contributed to gold's recent jump, it was largely driven by short covering, say commodity strategists.
"For gold, I think the behavior of the price move suggests it was largely short-covering. The U.S. dollar was a little weaker overnight, but also U.S. treasury yields moved higher, which would usually see gold lower. This makes me think it was an isolated move," Victor Thianpiriya, commodity strategist at ANZ told CNBC.
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Going forward, gains are unlikely to be sustained as the demand picture looks subdued, he said, forecasting a 10 percent decline in gold to $1,180 by year-end.
"Chinese demand is still on the sidelines while onshore stocks of gold remain elevated and ETFs (exchange traded funds) aren't adding to existing gold holdings," Thianpiriya said.
Gold has risen 5 percent so far this year, following its worst annual performance in over three decades in 2013.