Large swings in the price of gold over the past two weeks have cast major doubts over the fate of the precious metal, however one bank suggests the worst may be over for bullion this year.
Late Friday, HSBC slashed its 2013 price forecast for gold to $1,542 an ounce, from $1,700, a target that's still higher than current levels. Spot gold traded at $1,469 on Monday, and has risen around 9 percent since suffering its biggest one-day fall in 30 years on April 15.
HSBC said there are three factors that will give the yellow metal support, including a slowdown in exchange-traded fund (ETF) liquidation, robust retail demand from India and China and buying by emerging market central banks.
"We believe the bulk of liquidation has already occurred and that a large component of the market still has a 'buy and hold' trading strategy," James Steel, analyst at HSBC, wrote in a report.
(Read More: True Floor for Gold? How About $1,200?)
Since the start of the year, gold ETFs have liquidated 10.7 million ounces taking their combined gold holdings to 73.9 million ounces - with 5 million ounces liquidated since the beginning of April.
"A renewed period of risk aversion, uncertainty, or inflation could result in a renewed wave of ETF buying, supporting the gold price," he added.
Gold Rush in India, China
The main support for gold prices, however, will come from retail demand from the world's two largest Asian consumers, said HSBC.
"Jewelry is the single largest component of physical demand, comprising 45 percent of total demand (and) the majority of this demand comes from the price-sensitive markets, especially India and China," Steel said.
As gold prices moved lower, there has been a notable reaction in physical demand by consumers and investors in the emerging markets, he said.
(Read More: Why India's Appetite for Gold Is Something to Worry)
Gold imports in the world's number one consumer, India, are forecast to increase by up to 20 percent year on year in the second quarter, due to lower prices in local currency terms, according to the Bombay Bullion Association.
In China, bullion retailers have reported a surge in gold sales following the recent plunge in gold prices. Dennis Lau, director of sales operations at Chow Sang Sang, one of Hong Kong's biggest listed jewelry retailers, said that gold sales jumped by 150 percent in Hong Kong and Macau during the 13 April weekend compared with the previous weekend, the report said.
"A 15 percent rise in physical purchases in the two countries could increase gold consumption by 250 metric tons this year. This a little less than total gold exchange-traded fund liquidation so far this year," he said.
Support From Central Banks
Finally, Steel said he expects central banks to remain net buyers of gold this year, forecasting them to account for 450 metric tons of gold purchase this year, compared to 534 metric tons last year. Net purchases by central banks accounted for 12 percent of overall demand in 2012.
Data published by the IMF last week showed Russia, Turkey, Azerbaijan and Kazakhstan raised their gold holdings in March.
"The recent drop in price should not dissuade central banks from what appears to be a long-term policy of gold accumulation. They are less concerned about potential price appreciation and are more attracted to bullion, principally as a means to diversify away from the US dollar. Thus, US dollar-laden central banks, particularly in the emerging world, should continue to accumulate more gold this year and next, regardless of the recent sell-off," he said.
While some traders are optimistic the precious metal had found a floor, Michael Haigh, head of Commodities Research for Société Générale, believes the bottom is yet to come - at $1,200 an ounce.
"The big support on the downside is in the $1,200 handle, which is really the cost of production for the highest producers, which are the South African producers," Haigh told CNBC last week, noting that he sees gold ending the year "in the mid- to low-$1,300 level, and falling thereafter."