"It all depends on Fed policy," said James Rickards, managing director at Tangent Capital, who expects deflation fears to outweigh the Fed's desire to taper. Right now, he said, the fact that real rates are above inflation is a bearish signal for gold, and expectations of continued policy tightening is also pushing down prices.
"The case for buying gold is that the Fed is going to back off," he said. "They're not going to taper later this year. They'll actually going to increase asset purchases because deflation is winning the tug of war between deflation and inflation. Deflation is the Fed's worst nightmare."
"In the next two months, the Fed is going to make it clear that they will not taper," he predicts. "That's very bullish for gold."
Aside from Fed policy, Rickards expects China to start buying gold at these low levels, up to perhaps 4,000 tons. "People will say 'Why is China buying gold if it's so worthless?' " he said.
Tom McClellan, editor of the McClellan Market Report newsletter, is also bullish on gold, comparing the technical level of the commodity to the 2009 bottom in the stock market.
"It's the same emotional play that's going on, people falling out of love with stocks back then, people falling out of love with gold now," McClellan said. "We're reaching the climax point equivalent for the March 2009 low for the stock market."
"It's a hugely bullish condition for gold and i'm expecting a really large rebound," he said.
Rickards said that the destination for gold is $7,000 per ounce, although tightening of Fed policy could drive it down to $1,000 on the way there.
McClellan's target is between $2,800 and $4,400, based on his own technical analysis, although he did not dismiss the $7,000 level. He said that we haven't yet seen a "blow up moment" in the gold market yet.
"The moment that we see a major gold producer announcing that it's curtailing production or it's going out of business, that'll be the moment that we mark the low in gold. I expect to have one of those announcements any minute."
"We're getting down to the production price of gold right now and they won't continue producing gold at that level for very long," McClellan said.