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The Federal Reserve's multi-billion dollar, open-ended monetary easing pledge is being hailed as the catalyst for another crack at record highs in gold, but its failure to spark a high-octane rally suggests other factors are in play for the bullion market.
The Fed's plan to buy $40 billion US a month in mortgage-backed securities has been launched in a different gold market to the one in 2008, when an initial round of easing sparked a surge in volatility and a rush to consecutive record gold price highs.
Sky-high prices after the run-up of recent years are curbing demand for physical metal, while a sharp price correction after gold hit a record $1,920.30 an ounce in September 2011 has knocked confidence in its ability to keep extending gains.
Although gold put in a 2 percent price jump on the day this month when the latest Fed measures were announced - adding to an 8 percent climb over the preceding month in anticipation of the move - that rise fell short of this year's highs, petering out below $1,790 an ounce.
But that is not to suggest that the Fed's move will not ultimately lead to another record high in gold.
"With this open-ended commitment from the Fed to do whatever is necessary (for the U.S. economy), we will see new highs, but it may take longer than the market through to get there," Credit Agricole analyst Robin Bhar said.
"The gold price has really motored when everything has been aligned, and generally that has been when physical buying has been strong. That's been notably absent in the last quarter. It's all very well making physical purchases when the price is attractive, less so when the price is close to record highs."
"A lot will depend on how the dollar performs. The argument is that printing money debases the currency, and gold is the ultimate hard currency," he said. "Now, that argument has to be scrutinized. It has to stand up to the evidence."
In the short term, persistent weakness in the euro has been a major bar to fresh highs in gold. With violent protests against austerity measures breaking out in Spain and Greece this week, the single currency has wilted.
Gold's stellar gains in 2010, when prices rose by nearly a third, were largely fuelled by investors buying the metal as protection from the euro zone debt crisis. But the dollar has since taken over as investors' haven of choice.
The dollar index, which measures the U.S. unit's performance against a currency basket, has risen 5.5 percent since gold's September record, with the euro down 8.5 percent in the same timeframe.
With uncertainty over the outlook for Spain and other euro zone countries still rife, the single currency is set to remain under pressure this year. Consequently, gold may struggle too.
"If the dollar were judged on its own merits, it would have really seen quite a dramatic fall," London & Capital's chief investment officer Pau Morilla-Giner said.
"The economy in itself is not doing that well, and there is a lot of money being printed. That clearly would have taken gold to a much, much higher level."
On the physical side of the market, a continuing dearth of demand from India, historically the world's biggest gold buyer, is still curbing prices despite some recent signs of a recovery.
Indian gold imports are set to fall to 450 metric tonnes this year, roughly half their 2010 level.
"The one part of the puzzle that's still largely absent is a stronger pick up in Indian demand," Credit Suisse analyst Tom Kendall said. "We've seen a bit of an upturn as the rupee has strengthened, but we're still waiting for that market... to come back into gold in more sizeable volume."
The fourth quarter is traditionally a stronger one for Indian demand as the festival season gets under way. But it will need a sustained recovery in the rupee for a significant upturn.
That recovery is forecast to continue throughout the first half of next year. That is likely to take at least some pressure off Indian demand, potentially allowing policy moves a freer rein to lift gold.
ROCK BOTTOM RATES
Looser monetary policy, pursued across the world since the start of the financial crisis, is expected to work magic in the longer term on a metal that has risen for more than a decade.
Rock-bottom interest rates increase the appeal of bullion versus interest-bearing assets like cash, while the threat of future inflation make it attractive as a safe store of value.
For the moment, U.S. inflation appears to be contained, but price pressures are seen rising further along the curve, while the Fed's pledge to keep interest rates ultra low until 2015 will further underpin gold.
"The sensitivity to real interest rates is dramatic," Morilla-Giner said. "Any time you've had negative real rates, it's been a catalyst for gold to go up."
Analysts had long flagged a third round of QE - after QE2 was launched in 2010 - as the catalyst gold needed to reignite its run higher. Its current sideways trading notwithstanding, that view is intact.
"The market has already come up 12 percent since mid-August, so that's a pretty good rate of return over six weeks or so. It's natural to expect some consolidation before it pushes up through $1,800," said Credit Suisse's Kendall. "But the pull is definitely to the upside now."