2013 was a dire year for gold investors, its worst since 1981, as the precious metal plunged 34 percent from April to June. The sell-off was driven by heavy selling of exchange traded funds as investors saw the onset of tapering by the Federal Reserve dampening inflation expectations.
Many industry commentators have argued gold had lost its safe haven status in recent years, a call that came into focus again last year when it fell along with other risk assets.
Dominic Schnider, head of non-traditional asset classes at UBS, agreed with Capital Economics and said he believed the yellow metal had never lost its safe-haven status.
"We can't so bluntly say that gold has regained its safe haven status, because it never lost its tail risk insurance characteristics," Schnider told CNBC.
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"Gold has always been a hedge against sharply higher inflation (negative real interest rates), ballooning of central bank balance sheets and broad dollar weakness. All those three factors are still very influential drivers that move the price of gold," he added.
Schnider pointed out that gold's rally this year underscored its safe haven characteristics again this year.
He said uncertainty in equity market and technical factors contributed to gold's rally this year.
"A helping hand for the futures market to push prices up came from Exchange Traded Fund (ETF) investors, which stopped selling gold and started to build up some allocation towards the end of February and early March," he added.
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However, the UBS analyst doesn't expect the bullish run to last long.
He told CNBC that ETF selling will resume as investors price in U.S. interest rate hikes in 12 months' time, while Chinese buying, which has also helped prop up prices, will decline. Furthermore an improvement in pro-risk sentiment will reduce gold's appeal as a form of insurance.
"Eventually I think gold will hit marginal production cost (cash cost level) of between $1,000 to $1,200 an ounce," he said.
But Capital Economics analysts said they expected gold to continue its rally to reach $1,450 an ounce this year.
The analysts acknowledged that the recent spurt of safe haven buying could be fleeting, but even in its absence the easing of restrictions in India will help boost demand, they said.
— By CNBC's Katie Holliday: Follow her on Twitter @hollidaykatie