NEW YORK: With gold on track for its second-best month this year, traders in the options market are betting there is plenty of steam left in the rally.

Spot gold XAU=, which touched a five-year low of $1,077 an ounce in July, is up about 8 percent from then and broke through its 200-day moving average last week, the first time since May.

Market watchers attribute the strong bounce in the price of gold to recent market turmoil and the uncertainty around the timing of the long-awaited US Federal Reserve interest rate.

Traders have lapped up bullish options contracts on the SPDR Gold Fund (GLD.P), which tracks the performance of the price of gold bullion. Since the start of August, the gold fund has attracted inflows of about $950 million.

The demand for call options, that convey the right to buy the fund's shares at a certain price in the future, is high compared with the appetite for puts, usually used for more bearish strategies.

Presently, there are 2.3 calls open for each open put contract, up significantly from January, when there was just 1.6 call contract open for each open put contract.

Calls on the fund's shares rising above $125 by mid-January, up about 12 percent from its current level, represent the biggest block of open interest in the fund’s options with 86,000 contracts open.

Data from Commodity Futures Trading Commission last week showed that speculators raised their net long position in gold futures by 32,725 contracts to 82,546 contracts, highest since mid-May.

Since August, the fund has attracted strong inflows.

"All three things are saying the same thing: investor sentiment is turning more bullish towards gold," said Maneesh Deshpande, derivatives strategist at Barclays, referring to fund inflows, demand for calls and the CFTC data.

Deshpande recommended buying three-month call spreads on the gold fund or the Market Vectors Gold Miners ETF (GDX.P) to take advantage of the rally in gold and the accompanying spike in the shares of gold miners.

Some of the biggest gold miners, including Goldcorp Inc (GG.N), Barrick Gold Corp (ABX.N), and Newmont Mining Corp (NEM.N), are scheduled to report quarterly results next week.

Some say, however, that not much has changed with the fundamental outlook for gold.

"It (the rally) certainly could be a bottom-fishing type of thing," said Bruce Zaro, chief technical strategist at Bolton Global Asset Management in Boston.

"I think gold will likely remain in the downtrend," Zaro said.

Goldman Sachs estimates prices at $1,100 in three months, $1,050 in six months and $1,000 in 12 months.