Chicago -- (Kitco News) Gold prices could retain an upward basis next week but volume could be light as the market deals with any last-minute summer vacations in the run up to the U.S. Labor Day weekend.

Still, some market watchers believe gold is stuck in a trading range, similar to equities and crude oil, waiting for an impetus to drive direction. At 1:50 p.m. EDT (1750 GMT), December gold was 20 cents higher at $1,237.90 an ounce on the Comex division of the New York Mercantile Exchange. Shortly afterward, spot gold was $1.50 higher at $1,237.80.

The highly anticipated U.S. gross domestic product report came out Friday, showing a second-quarter revision of 1.6% growth, sharply cut from a 2.4% reading when initially estimated. While it was slightly better than expected – market watchers said anywhere from 1.3% to 1.5% was forecast – it still shows the U.S. economy is growing at a torpid rate. Comments Friday from U.S. Federal Reserve President Ben Bernanke did not change anyone’s view on gold, according to those contacted by Kitco News.

“The bullish stance remains,” said one bank trader.

Not only do worries about an economic recovery persist, but he cited concerns among some that efforts by central bankers to revive the economy will eventually prompt inflation. The trader also suggested the dollar may weaken some more, which in turn tends to underpin gold.

Any moves in gold could be exaggerated next week due to expected thin trading conditions amid late-summer vacations and the U.S. Labor Day holiday on Sept. 6, when markets are closed.

The light trading volumes for gold and the lack of fresh news has some market watchers disinterested in the yellow metal.

“I’m in the camp where I’m ambivalent. If someone put a gun to my head, I’d be short. There’s no good reason to own it. There’s not much to trade here,” said Ken Morrison, founder and editor of online” newsletter, Morrison on the Markets.

“For the next two weeks, I’d rather be short than long, but I think gold is going to be dead in the water for a while. Volume has declined markedly,” he said.

He added gold is running into resistance at $1,240-$1,245 and noted that speculators have cut some of their long positions in gold futures, which is not bullish for prices.

“Gold has been investor-led higher, not consumer led, but I wonder, at these prices does either one want to own it? There’s no fear out there, there’s no inflation,” he said.

To make him own it, either long or short, he said: “I want to see panic in one direction or another. That means maybe taking it to the June high, on high volume and unable to go through it. Or, see panic selling. That can suggest a change in direction.”

Spencer Patton, founder of Steel Vine Investments, said gold could be range-bound, and it is unlikely to break to beyond the all-time nominal highs set in June. “I think at the end of the day, gold is getting ready to consolidate,” he said. “If we try to break out to new highs, I think it will be a failed break out. I think gold will trade between $1,100-$1,200 through the end of the year,” he said.

Patton said he’s watching a potential head and shoulders top formation on technical charts, with the left shoulder at the May highs, the head at the mid-June highs and the right shoulder being formed now. “It is in no way complete. The neckline is at $1,160, but if we fall below it, it could mean a break to $1,060,” he said.

MKS Finance S.A. said given gold’s action on Friday – breaking initially after Bernanke’s comments and then ending with slight gains – the market performed well. Looking ahead the firm said: “The main danger for the yellow metal right now could be the risk of scrap selling, contained for the moment but which could arise should the yellow metal move more definitely above $1,240. We expect the market to be quite nervous next week being the end of the summer and the beginning of the busy September.”

By Debbie Carlson, contributing to Kitco News;dcarlson@kitco.com

Editor’s Note: Meet the Kitco News Team at the upcoming Kitco Metals eConference September 12-13, 2010. A not-to-be missed event featuring Ron Paul, Marc Faber and other industry heavyweights. The eConference is free with Pre- Registration www.kitcoeconf.com.

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