slumped to its lowest level in 15 months on Monday, leaving investors split over the near-term outlook as it trades near key technical levels.
Better-than-expected U.S. jobs data on Friday boosted the dollar and dampened safe-haven demand for gold, pushing prices to $1,183.46 on Monday.
A break below key support $1,180 would spell further pain for gold, said Chris Weston, chief market strategist at IG. Gold fell to the $1,180 level twice last year, in the second and fourth quarter, but rebounded on both occasions.
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"If we get break of $1,180, $1,100 is on the cards before year-end," Weston told CNBC. "There's a perfect storm for gold. Inflation expectations in the U.S., Europe and Japan—three of the biggest economies—have been falling. There's no reason to hedge yourself."
Gold has declined 9 percent over the past six months, failing to draw strong safe-haven bids from simmering geopolitical tensions in Eastern Europe and the Middle East that have traditionally seen investors flock to the precious metal.
Instead, the benign inflationary environment and rally in the U.S. dollar have dulled the appeal of the precious metal. A stronger dollar is negative for gold demand as it makes the metal more expensive for holders of other currencies.
Andrew Su, CEO of Compass Global Markets, who is "aggressively buying" gold at current levels, has a brighter outlook for the precious metal.
"Gold is oversold at this level. I think it's an overreaction to U.S. dollar strength," he said. U.S. dollar strength is set to ease, said Su, who expects Federal Reserve Chair Janet Yellen will soon reassure investors that the first rate hike is still some time away.
"I think there will be a rebound driven by short-covering," he said, predicting that gold will rise to $1,250-$1,300 by year-end.
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Indian festival season: a silver lining for gold?
India's upcoming five-day Diwali festival, seen as an auspicious period for gold buying, will boost physical demand in coming weeks, says Su
However, he notes that the weak rupee—which has declined over 4 percent against the dollar in the past four months - and gold import restrictions will limit buying in India—the world's second largest gold consumer after China.
Last year, India implemented tough duties and quantitative restrictions on gold imports as part of efforts to lower the country's current account deficit. Many analysts had expected the new government would remove these restrictions. However, Prime Minister Narendra Modi kept the policies unchanged in his maiden budget in July.
As a result, Diwali—which begins on Oct. 23—will be more of a "support than a driver," he said.
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Jonathan Barratt, chief investment officer at Ayers Alliance Securities agrees the Indian festival season won't be a game changer for the precious metal.
With the weight of exchange-traded fund selling, Indian demand won't provide much of a boost, he said.