Thursday's closely-watched non-farm payrolls, a key U.S. economic barometer, will test the resilience of the gold market's recovery, following bullion's back-to-back quarterly gains.
Gold bulls are betting the June jobs report will fall short of expectations, confirming the U.S. Federal Reserve's stance of keeping interest rates near-zero for longer, weakening the dollar and lifting bullion.
A softer dollar makes gold cheaper for buyers paying in currencies other than the U.S. currency.
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"Chances are the Fed will overstay its welcome with easy money,' said Hans Goetti, head of investment Asia at Banque Internationale a Luxembourg. "This is bullish for gold."
Analysts polled by Reuters on average expect a non-farm payrolls gain of 210,000 for June versus 217,000 in May. Anything worse than expectations "will be a plus for gold", according to Jeffrey Nichols, senior economic advisor to Rosland Capital.
The metal traded at a three-month high on Tuesday at just over $1,332 an ounce. It gained more than 2 percent in the second quarter, after rising nearly 7 percent in the first.
Last month, U.S. first-quarter economic growth was revised sharply down, with gross domestic product (GDP) falling at a 2.9 percent annual rate – its worst performance in five years. As such, this week's payrolls data need to show "an equally large positive surprise" to spur a revival in economic optimism, said Anthem Blanchard, founder, president and CEO of Anthem Vault, a U.S.-based online precious metal retailer.
If a hefty payrolls beat fails to materialize, and if unrest in Iraq and Ukraine continues, both gold and silver will generate "good value buys at these price points", Blanchard added.
CNBC's weekly sentiment survey backed this bullish view, with nearly half of respondents (47 percent or 9 out of 19)) forecasting gold price gains this week, though some strategists warned any rally may stall at around $1,330 or $1,340 an ounce.
The poll results corresponded with a survey by IG Markets, which revealed that 73 percent of their more-than-500 clients with open positions expected gold prices to rise.
Some 26 percent (5 out of 19 respondents) said gold's gains may fade this week, and an upbeat jobs report would be the catalyst for a pullback.
Gold bears UBS and Societe Generale maintained that the U.S. economy is improving, paving the way for eventual Fed rate hikes in 2015, shoring up the dollar and eroding bullion's appeal.
"Monetary policy normalization in the U.S. will be a constant drag on gold prices in the coming quarters," UBS commodity strategists Dominic Schnider and Giovanni Staunovo said in comments emailed to CNBC. The bank holds a "neutral" view on gold in the short-term and is "bearish" over the next 12 months.
Equally negative on gold's outlook, Societe Generale said the metal is unlikely to sustain its recent gains, adding: "We maintain our negative stance on gold… the gold bubble is still deflating."
By- Sri Jagarajah