As leaders from around the world meet this week to discuss fears of competitive currency devaluations, analysts told CNBC the currency war could lead to a sharp rise in gold prices in the second half of this year, after a falloff in the first half.
"We think a currency war will be the biggest story of 2013 when we look back on the year," Patrick Armstrong, managing partner at Armstrong Investment told CNBC on Monday.
Currency devaluations will be on the agenda as the Eurogroup of finance ministers meets on Monday. France said it would raise the issue of the strengthening euro at the meeting, and again on Friday when the G20 finance ministers meet in Russia.
Armstrong said gold always does very well when there's bad news, and said Armstrong Investment is long on the precious metal.
"The G20 meeting I think is going to focus on what people are doing with their currencies, trying to gain an edge with currency manipulation. Whenever that's the backdrop, gold has a place in the portfolio," he said.
Gold has performed poorly in recent months and has actually dropped in price this year.
"We're actually short put options on gold as well right now, because you don't get a yield with gold. It's a way to create a bit of a yield," Armstrong said. This lets him hedge against a downward movement in gold prices.
"It has an implied [volatility] of 14 percent, which is a bit more than equities right now."
Michael Widmer, metals strategist at BofA Merrill Lynch Global Research, has a similar outlook. He told CNBC on Monday that the volatile price of gold has more downside in the near term, before any currency wars truly begin, than in the longer term.
"I think the problem that the bugs have at the moment is that there really is a lack of a drive out there," he said.
"I wouldn't be surprised if we had another 100 bucks downside from here. And that's simply because I think we are moving now into an environment where we should see global growth starting to come in a little bit better."
(Read More: Global Currency War Could Get Nastier: Brazil)
The potential upside for gold in the second half of 2013 will be $250-$300, said Widmer, as markets have yet to price in that countries will continue to devalue their currencies.
"If the yen remains relatively weak, I think other emerging markets, or Asian central banks, should start to become more proactive in managing their exchange rates," he said.
"If that happens their FX reserves should start to increase, and then they should start to diversify their U.S. dollar holdings into gold holdings again, which has happened during the past few years."
(Read More: Are You Buying Gold?)
Last week, European Central Bank President Mario Draghi told a press conference on Thursday he will monitor the impact of a strengthening euro. Meanwhile, EU Commissioner Olli Rehn told Austrian magazine Profil on Saturday that reforms are needed to the international monetary system to avoid a negative impact on trade.
"I recognize the risk of competitive devaluation," Rehn said. "We have recently warned the government of Japan about corresponding steps towards depreciation of the yen."
The yen has fallen in value since the Bank of Japan doubled its inflation target to 2 percent in January, and made an open-ended commitment to continue buying assets next year.
—By CNBC.com's Matt Clinch