The current bull market in gold is broadly based, not the result of speculators -- and the rally has more room to run, a UBS analyst said Monday.

Besides the rally being broadly based, Edel Tully said physical demand out of Europe remains decent.

Tully remains confident that as long as big-picture economic factors remain negative, gold will remain positive.

While further upside is more of a question of how much, rather than if, the risk of a short-term sell-off can't be ignored given the pace of its rally; as we said last week, a $100+ correction is possible, she wrote in a note. On Friday, rumours about CME margin hikes created some nervousness, and further gold volatility this week is likely to fuel more such fears. But unless a series of positive macroeconomic numbers emerges, which seems unlikely at this stage, we strongly believe the dips will be bought.

On area where gold is vulnerable is Friday's speech by Federal Reserve head Ben Bernanke.

Growing speculation that (he) will hint at further easing in his Jackson Hole speech is prompting investors to buy gold here. But should Bernanke put a damper on QE3 expectations, the yellow metal could well experience the correction that potential investors have been impatiently awaiting.

In early afternoon trading gold on the CME Comex was up 1.8 percent to $1,885.50 per ounce.