No one should be surprised if gold prices take another dive. The market certainly remains vulnerable to more institutional selling. That said, I'm looking for a bounce-back in the week ahead -- with the yellow metal recovering some of the ground lost in the recent flash crash -- if only because the price has fallen so far, so fast.

Some of the institutional players who were inclined to lighten their long positions or short the metal along the way down have already done so . . . and some of the large hedge funds -- including a few that made news by selling in recent months -- may begin re-establishing long positions at what they believe to be attractive long-term acquisition prices.

Moreover, Asian buying has been especially strong -- apparent from the large premiums in the key Asian markets over London and New York delivery -- and retail investment demand for coins and small bars in the U.S. and Europe has also provided some support.

I expect that some central banks have been and will continue to buy on dips and this too should help

However, the key to recovery is in the paper market. What the hedge funds and other large-scale institutional traders need now is a sense that downside risks are retreating and some degree of comfort that prices have hit bottom.

When that confirmation comes, pent up demand could give the metal a short-term boost . . . and, from there, who knows?

Recent talk of Fed tapering (that is reining in its accommodative monetary policy by reducing the magnitude of its monthly bond purchases) along with a worsening global economic picture has given the U.S. dollar a boost in world currency markets -- and, by extension, has contributed to the swift sell-off in gold.

But with U.S. employment markets showing no signs of real and meaningful improvement and recent inflation data below the Fed's own targets, expectations among Fed watchers are beginning to shift, albeit subtly, and this could make a world of difference for gold in the weeks and months ahead.

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