Trends in the dollar and bond yields will remain crucial during the week ahead and gold overall will struggle to make a further significant recovery.
The overall dollar tone will be important during the week ahead after the US currency came under significant selling in the current week. Dollar weakness was crucial in preventing further gold losses and any further selling momentum for the US currency would underpin gold.
The US data releases are unlikely to have a major market impact in isolation during the week, although there will be potentially important evidence on the underlying outlook.
The overall tone will be important following another weaker than expected headline reading for consumer prices and retail sales.
The New York Empire manufacturing survey will be released on Monday with the Philadelphia Fed survey on Thursday.
After strong readings last month, another robust reading for the regional surveys would underpin confidence in the underlying US outlook and underpin the dollar.
The housing data will also be watched closely after a run of generally disappointing data.
The latest Federal Reserve FOMC meeting will be held the following week and individual FOMC members should not, therefore, make any comments on the economy or monetary policy during the blackout period, which will be in force throughout the week ahead.
The ECB monetary policy decision and press conference will be important for underlying sentiment. A hawkish tone would tend to push bond yields higher, which would undermine potential gold support, although the impact would tend to be offset by a weaker Euro.
A dovish tone would tend to support the dollar, but put downward pressure on yields.
From a wider perspective, overall trends in confidence surrounding the global economy and monetary policy expectations will continue to have an important impact on gold. Confidence in the global economy would tend to put upward pressure on bond yields and also lessen any defensive demand for gold.
Selling pressure on precious metals will also tend to increase if there is evidence that international central banks will continue the gradual process towards removing the amount of monetary policy accommodation.
Overall trends in risk appetite will be important with reduced scope for defensive gold demand if overall risk conditions hold firm and equity markets make further headway.
There will, however, be the risk of a sharp corrective retreat in markets given the current complacency over conditions.
If gold is subjected to renewed selling, the key support levels between $1,180 and $1,205 per ounce will come into strong focus.