Gold experienced its largest weekly gain in almost two years and gold traders are now the most bullish in over a month. Nevertheless, the positive sentiment has not stemmed outflows from gold-related exchange traded funds yet.

Spot gold prices are set to increase 4% for the week, the largest weekly gain since October 2011, after the Fed announced its intention to keep stimulus measures in place due to the low inflation levels and uncertain job market, Reuters reports. [Gold, Silver ETFs Ripping on Bernanke Dovish Comments]

Gold futures were trading around $1,278 per ounce Friday.

According to Bloomberg, nineteen surveyed analysts expect higher prices next week, while nine remained bullish and three neutral, reports Nicholas Larkin for Bloomberg.

“With the Fed comments, with the increased cost of funding a short position and some recalibration in peoples’ thinking about the end of quantitative easing, the onus is really on the bears now,” Ross Norman, chief executive officer of Sharps Pixley Ltd., said in the Bloomberg article. “Physical demand is supporting the market very nicely.”

Global jewelry and coin demand surged after gold dropped in April. The U.S. Mint sold 21,000 ounces of American Eagle coins so far this month, which is on course to beat the average 57,000 ounce June total.

However, a rally in riskier equities could dampen the appeal for safe-haven gold ETFs.

“The fact that the leading U.S. equity indices closed at record highs yesterday – which could prompt investors to switch once again from gold ETFs to equities – is problematic for gold,” Eugen Weinberg, head of commodity research at Commerzbank, said in the Reuters article. “Any prolonged recovery of the gold price is almost inconceivable unless the ETF outflows abate.”

The SPDR Gold Trust (NYSEArca: GLD) holds about 30.2 million ounces of physical gold, which is at a 4 1/2 year low. Over the past week, GLD lost $1 billion in assets, the largest biggest weekly loss of 2.6% since the end of April, according to IndexUniverse data. [Gold ETFs Still Bleeding Cash]

For more information on gold, visit our gold category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD.

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