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LONDON:\u00a0 Gold\u2019s 9% rebound in August to around $4,400 an \u200counce suggests bullion is starting to regain favour with institutional investors and central banks, leaving the market better placed to extend gains as it moves beyond the initial shock of the U.S.-Israeli war with Iran.<\/strong><\/p>\n The outbreak of the \u200bwar in late February drove gold from a record high of $5,595 per ounce in January \u200bto below $4,000 in June as investors sought liquidity and some central banks tapped reserves \u2060to support domestic economies amid an oil price rally.<\/span><\/p>\n \u201cIt feels as though the handbrake has finally \u200bbeen released from gold,\u201d said Ross Norman, an independent analyst.<\/span><\/p>\n Gold prices have broken above two key resistance \u200blevels this month, helped by lower oil prices and softer U.S. inflation data that reduced expectations for future rate hikes.<\/span><\/p>\n \u201cIf oil doesn\u2019t steal the show again, if the situation in the Middle East does not erupt and oil prices \u200bspike, then it looks as if the path of least resistance for gold is higher,\u201d said \u200bJames Steel, chief precious metals analyst at HSBC.<\/span><\/p>\n The strength of the price rebound over the past two weeks suggests \u200ccentral \u2060banks or sovereign wealth funds may have been active, Steel said, adding that this thought was an inference rather than confirmed knowledge.<\/span><\/p>\n Another likely source of support was institutional demand for large bars as premiums in Asian trading hubs, including China, implied renewed buying interest. In China, the gold premium was at $1.50 \u200ban ounce last week.<\/span><\/p>\n \u201cIt \u200bis really, I think, \u2060the rebuilding of positions that large institutions had before the conflict with Iran,\u201d Steel said.<\/span><\/p>\n Limiting the upside for bullion are faltering talks to end the Iran \u200bwar, subdued jewellery and coin demand as well as flows into gold-backed \u200bETFs, which \u2060are sensitive to interest rates. According to the World Gold Council, these ETFs added only $7 billion to $582 billion of assets under management in the first half of August.<\/span><\/p>\n