Gold started the week by edging higher Monday, trading around $1475 per ounce by lunchtime in London, as stocks also gained, US Treasuries were broadly flat and the Euro edged higher against the Dollar following news that Italy’s borrowing costs have fallen.

Strong demand for physical gold from private households meantime continues to cause bottlenecks and price premiums.

“The increased physical demand seen since the price correction supports the metal and affects the trading premiums,” says a note from German refining group Heraeus.

Gold traders in Dubai meantime continue to report premiums over the spot gold price of up to $10 an ounce for physical bullion.

“Retail demand…will be the key support for gold and is the main reason we expect prices to stabilize and move slowly higher,” says a note from HSBC, which this morning cut its 2013 average gold price forecast to $1542 an ounce, down from $1700 an ounce, while cutting its silver forecast from $33 an ounce to $26 an ounce. “The capitulation in the gold price dealt a severe blow to investor confidence, which may take many months restore. Unless significant institutional demand returns to the market, we believe prices will struggle to get over the top end of our range of $1625.”

The world’s biggest gold exchange traded fund SPDR Gold Trust (ticker: GLD) saw a further 7.2 tonnes of outflows Friday, taking the total holding of bullion to back its shares to 1083.1 tonnes. Since the starts of the year the GLD’s holdings have shrunk by nearly a fifth.

“In the past two weeks, as global economic data have generally underwhelmed, the ETF selling actually increased in velocity,” says a note from Nomura. “This does not bode well for the remainder of 2013 for the ETF demand category…the recent downward move in inflation expectations and the lack of price reaction to both the Cypriot bailout and the changes in the Japanese monetary base have put gold’s investment rationale somewhat under pressure.”

On the New York Comex meantime, the so-called speculative net long position of gold futures and options traders fell to its lowest level since November 2008 in the week ended last Tuesday, weekly data published by the Commodity Futures Trading Commission show.

The spec net long – calculated as the difference between the number of ‘bullish’ long and ‘bearish’ short contracts held by traders classified by the CFTC as noncommercial – fell by 21% to the equivalent of 260.3 tonnes.

“The preceding week’s fall in net speculative length appeared relatively mild, so perhaps this past week’s decline was a catch-up,” says Standard Bank commodities strategist Marc Ground. “Clearly, the futures market was not convinced that gold could sustain its upward momentum.”

The reported size of noncommercial futures and options positioning rose above 90,000 contracts for the first time since mid-February, only the second time this has happened since at least 2004.

Looking just at the CFTC’s Managed Money category, which includes players such as hedge funds, the Tuesday-reported number of short futures contracts in 2013 has averaged more than 50,000. Between June 2006 and the end of 2012 the average was less than 16,000 contracts.

“The key question in the near term is whether retail and jewelry demand can continue to counter [exchange traded fund] outflows and the rise in [Comex] gross shorts,” says a note from Barclays.

Silver meantime rose above $23.30 an ounce while the picture was mixed for other industrial commodities, with copper gaining but Brent crude oil down.

“We feel we are due for some sideways consolidation,” says the latest technical analysis note from bullion bank Scotia Mocatta. “Resistance is at $24.25…[while] support is at the recent low of $22.07. If we breach support, the risk is an eventual target of $17.73, a full retracement back to August 2010.”

Italy saw its borrowing costs fall to their lowest level since October 2010 at an auction of 5 and 10-Year bonds this morning. The yield on 5-Year debt fell to 2.84%, down from 3.65% at a similar auction last month, while 10-Year yields fell from 4.66% to 3.94%.

Since last month, Italy’s parliament has re-elected Giorgio Napolitano as president, who in turn has nominated Enrico Letta as prime minister. Letta reached agreement on forming a government over the weekend, following a two-month deadlock after February’s inconclusive general election.

Any decision by Cyprus meantime to sell some of its gold bullion reserve would not necessarily be “the thin end of the wedge” that led to gold sales by other Euro members, according to Rhona O’Connell, senior analyst at metals consultancy Thomson Reuters GFMS.