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Gold's Future Is Anybody's Guess

AP

As gold bounces back from its worst two-day sell-off in 30 years that spooked investors and upset market estimates, analysts remain divided on where gold prices are headed from here.

In the bear camp, Andrew Dale, Asia head of resources research at Macquarie Securities, told CNBC that gold doesn't appear to have much steam to go beyond $1,400 an ounce.

"The investment drivers for the metal have come under pressure and there's no reason right now to see any huge gains back to previous levels," Dale said, citing easing inflation, the strength of U.S. equity markets and outflows from exchange-traded funds as the major causes behind the weakness in gold.

The precious metal that hit a two-year low of $1,321 per ounce on Tuesday was trading 0.6 percent higher on Wednesday in Asian trade. It is still, however, down about 18 percent year to date and far away from its peak of $,1,920 reached in September 2011.

(Read More: Scariest Part of Gold Crash? No One Knows Why It Happened)

Gaurav Sodhi, resources analyst at investment firm Intelligent Investor, said the sentiment for gold has changed after a 12-year bull run and he doesn't expect it to "alter" anytime soon.

"I think what we're seeing today [Wednesday] is just a bounce and there could be further weakness in that gold price," Sodhi said.

Last week news that Cyprus could be selling its gold to fund its debt scared markets and this could set the precedence for other European central banks to follow suit, Sodhi added.

(Read More: Cyprus to Liquidate Most of Its Gold Reserves)

But the bearish sentiment is contrasted by optimism that gold will head higher after this rout. According to HSBC, a recovery in jewelry and gold coin sales, stimulated by demand from India and China and mine expansion plans as productions costs fall will lead prices higher.

"It may take a long time for investor confidence to return. But we do believe gold is becoming oversold and that tighter supply/demand fundamentals and a still positive macroeconomic background, will eventually lead to a steady grind higher," HSBC said in a note.

Bank of America Merrill Lynch Global Research backed that sentiment saying a pick up in jewelry demand should support the $1,500 an ounce level, adding that it's "highly unlikely" that other European periphery countries like Portugal and Greece would start selling their gold.

Accelerating inflation, European central bank easing and emerging markets buying gold for reserves will support gold prices in the second half of the year, according to BofA Merrill Lynch Global Research.

-By CNBC.com's Rajeshni Naidu-Ghelani; Follow her on Twitter @RajeshniNaidu