Is this a breakout for gold price or just an oversold rally?

Gold kicked off December with two consecutive daily gains, which pushed the precious metal above $1,830 an ounce on Wednesday, report agencies.

Is this price action the start of a new bull run for gold, or is it just recovering after a steep drop last week?

There is a mix of drivers supporting gold's short-term move up, including a weaker U.S. dollar, which hit a 2.5-year low on Wednesday.

"The meltdown in gold has likely run its course, leaving the market with fewer traders long, although the remaining gold bugs now hold larger than average position sizes, flagging they are higher-conviction traders," said TD Securities strategists on Wednesday.

Last week's drop below $1,800 an ounce seems to have triggered a recovery as investors re-engage with the metal, analysts said.

"On one hand, we know gold was grossly oversold and had diverged from real rates and USD weakness, so the flush out had played out, and the relationship wasn't going to breakdown forever. There has been some selling in the crypto space, so whether that has had a hand in pushing up gold et al is unclear," Pepperstone head of research Chris Weston said on Wednesday.

But how far can this recovery take the gold market? Weston pointed to one particular line in the sand, and if crossed, gold bulls might be in for a run higher.

"Gold has been a shining light, with price closing above the 5-day EMA for the first time since 11 November. The question is whether we can push into $1,848 and the former breakout low? That is the line the gold bulls need to face to assess if this is more than just short-covering and oversold rally," Weston said.

TD Securities looks for gold to keep rising into the year-end and advancing north of $2,000 an ounce in 2021 in light of inflation expectations.

"Given real rates haven't managed to rise further, while the broad dollar continues to print new lows and the Fed sounds an accommodative tone, we expect that a continued economic recovery will once again fuel investment appetite in gold as an inflation-hedge asset," TD Securities said. "This could create a bullish setup for the yellow metal as we head into the December FOMC, where we expect that the Fed will ease by extending the weighted average maturity of its Treasury purchases."

Commerzbank is waiting to see if this upside price action is sustainable before making a call on whether this is a breakout moment for gold or not.

However, the bank did highlight some key drivers to watch when making that call, including gold-backed ETF trends and fiscal stimulus progress.

"ETF investors still appear to be skeptical. The gold ETFs tracked by Bloomberg registering outflows of 9 tons once again yesterday. For the gold price to see a trend reversal, this trend would also need to be reversed," said Commerzbank analyst Carsten Fritsch. "A number of Fed officials stressed the urgency of another fiscal package yesterday. Treasury Secretary nominee Yellen warned against a self-reinforcing downturn. Furthermore, Congress will need to agree on a budget by the end of next week to prevent the shutdown of federal agencies. The uncertainty over this could weigh further on the U.S. dollar and lend additional buoyancy to precious metals prices."