The beleaguered gold sector has started to show some renewed sparkle as the precious metal remained near one-month highs on the back of an unwinding of short positions and weaker-than-expected US housing data.
Gold stocks on the sharemarket closed 3.9 per cent higher on Tuesday, led by Sirius Resources, which was the biggest gainer on the ASX200 at 13.04 per cent.
The price of gold, which has been battered by a strengthening US dollar amid expectations of a possible end to the country's monetary stimulus program, has fallen more than 20 per cent this year. The price slumped to a low this year of $US1184 an ounce last month.
It was trading at $US1333 late on Tuesday, and has now risen more than 12.5 per cent in almost two months.
RBS Morgans director of equities Tony Dennis said: "I think we might be able to see the gold price retraced to about the $US1400 level. I think that's where it runs into some resistance."
Mr Dennis said he expected the price to rally further, especially as the markets were heading into the seasonally strong months for gold: July to September. But he expected the strong US dollar to keep a lid on the price beyond $US1400.
Panaust finished strongly with a 5.56 per cent gain on Tuesday, while Newcrest was the fourth-biggest gainer on the ASX200 at 5.44 per cent.
ETF Securities' Danny Laidler said he expected the recent rally to remain sustainable in the medium term amid strong physical demand from China, continued volatility in sharemarkets and less positive economic data from the US and China.
"When you combine that with the fact that the price correction has brought gold back down to an attractive value, then I think in the medium term, the outlook for gold is very positive," Mr Laidler said.
"It's not that people are getting wildly bullish on gold, they're just not as bearish any more."
The precious metal price was about $US1600 when it slumped in April, and again last month, pushing some of Australia's highest-cost goldmines into the red. Jobs were shed as miners cut costs and focused on more profitable mines.
Macquarie Private Wealth analysts said they continue to see gold as an underperformer in the short and medium terms, but they said low-cost operators such as Regis Resources and Beadell Resources were standouts in the sector.