(Kitco News) - Gold may well extend its recent gains next week as worries about the economy and debt levels in the U.S. and peripheral European nations persist.

Nevertheless, there remains potential for a technical correction or profit-taking, after such a sharp run-up lately, or, as one trader commented—“too much of a good thing.”

Shortly after 2 p.m. EDT, December gold was trading at $1,653.60 an ounce on the Comex division of the New York Mercantile Exchange. This represented a gain of $22.40, or 1.4%, from the prior week’s settlement of $1,631.20.

December gold on Thursday hit a peak of $1,684.90,  a record for a Comex most-active contract. The run-up occurred even though a new debt-ceiling agreement was reached in Washington, with market participants still worried about the high deficit and whether the U.S. credit rating will be downgraded yet. Further, European debt issues persist and much of the recent data—prior to stronger-than-forecast U.S. non-farm payrolls on Friday—have fallen short of market expectations.

Several traders and analysts said those economic and deficit worries mean gold likely will remain in favor among traders and investors.

“I’m looking for gold to go back up and test the highs, regardless of which situation we’re in,” said Charles Nedoss, senior market strategist with Olympus Futures. “If you’re in the inflationary camp or deflationary camp, there is a good, compelling reason to buy gold.”

Mike Daly, gold and silver specialist with PFGBEST, commented that gold is only $30 or so from its record highs despite big sell-offs in other markets in the last couple of days.

“They (investors) are still using gold as a safe haven and I think they will continue to do that,” Daly said. “Next week will be one week closer to the Indian wedding season. I expect jewelers from both China and India to start purchasing physical bullion, which should help support the market somewhat.”

Many weddings tend to occur in India during autumn, and this normally involves the giving of gold as gifts.

“Gold stepped back. It needed to correct…But gold has proven its resiliency and can take a hit and come right back,” Daly said.

Technically, December gold remains above last week’s high, which is constructive on the charts, said Ralph Preston, senior market analyst with Heritage West Financial. “As long as we continue holding those highs from last week, I would look for a move into $1,700 territory.”

Still, some look for at least a temporary pause, including some of the bulls. Ira Epstein said he looks for gold to advance toward $1,800 by year-end, but suggests some sideways action is likely first since markets collectively have already factored in much negative news that tends to support gold.

“I’m not bearish. Let’s make that clear. But I’m concerned that the upside momentum is waning,” he said, commenting that some of the technical indicators he watches have turned sideways and there is Bollinger-band resistance around $1,668.

“I would look to be a buyer after a correction sets in,” Epstein added.

Gold pulled back from its record highs this week when equities fell sharply Thursday, with several analysts at the time citing selling of gold to raise cash to cover losses and margin calls in equities and other commodities that were in a freefall. Some traders said they see potential for more such selling in the near term if equities continue to stumble.

With this potential for liquidation, investor and newsletter writer Dennis Gartman said early Friday that he was exiting half of his gold position. He favors holding the metal in other currencies, such as the euro and British pound, but gold also fell back from its highs in these currencies. He said in The Gartman Letter: “Given the circumstances prevailing in a world that shall put a premium high upon liquidity, we think it is wise to liquidate our gold holdings ahead of everyone else.”

Jimmy Tintle, broker and market analyst with Transworld Futures, looks for a technical correction.

“I just think the extreme move we’ve had in the last week or so has overextended itself,” he said. “I think we need a healthy correction. I think we may rally Monday and Tuesday if this (uncertainty) continues. But I’m thinking it’s too much of a good thing without any kind of a correction.”