After escaping the summer doldrums, gold has been edging up in recent weeks, raising the possibility of a rally in the final quarter of 2015.
However, some analysts are doubtful that the precious metal will push much higher.
Spot gold crept up 0.2 percent on Tuesday to $1,137.66 an ounce, but gold prices are still down nearly 4 percent year-to-date.
In a note published on Tuesday, UBS points out that the precious metal remains reluctant to break higher despite easing expectations of a rate hike by the U.S. Federal Reserve this year.
Speculation that the Fed might raise rates this year — a move that would boost the dollar and hurt demand for the non-interest paying metal — reached fever pitch ahead of its September meeting. However following the latest meeting, when the Fed decided to hold rates on rising concerns about the global economy, analysts increasingly expect the central bank to delay a hike until next year.
“The Fed has been on hold for so long that the risk is to the side of raising rates prematurely,” Anika Khan, senior economist at Wells Fargo told CNBC Tuesday.
The “key missing piece”, UBS notes, is physical demand. That could ramp up in soon, with Chinese investors returning from holidays later this week.
“Healthy appetite from India and China would act as an added reassurance for investors,” the brokerage said.
It remains cautious however, highlighting that as the final quarter of 2015 unfolds, “a growing challenge for gold and for the rest of the precious metals complex would be that investors are likely to become more protective of year-to-date performance.”
“Time horizons and positions are likely to become increasingly limited the closer we get to year-end. This could result in gold getting trapped within a range, albeit amid choppy interim price action.”