According to Teoh, over the past 20 years the pullback in gold prices has, on average, been under 10 percent. But between October last year and late June, gold prices slumped by 35 percent - a move that caught many investors by surprise and which Teoh said probably supports the view that the sell-off was overdone.
The recovery in gold prices has been supported by an easing of expectations that U.S. monetary stimulus could be unwound sooner rather than later.
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The Federal Reserve's asset purchase program has underpinned gold prices in recent years because it has kept interest rates low, which in turn has weighed on the dollar and made assets priced in the U.S. currency cheaper for foreign investors.
"I think we have seen the worst of the sell-off in gold," said Jonathan Barratt, founder of the commodities newsletter Barratt Bulletin, in Sydney. "Whilst the (U.S. monetary) stimulus stays in place, the dollar will be weaker and that's good for gold."
There have been heavy outflows from gold-backed exchange-traded funds (ETF) over the last few months, but New York's SPDR Gold Shares - the world's largest gold ETF - said holdings were unchanged for a fifth day on Wednesday.
If the ETF outflows come to an end, one key factor undermining gold prices would be taken away, analysts said.
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"We hold the view that gold prices have broken out of the downtrend. Our short-term view is that it has to stay above $1,327, with an immediate target price of $1,370," said IG's Teoh.
Barratt agreed, adding that he was looking for a move to $1,375 and then $1,400 over the next month or two.
Rich Ilczyszyn, founder and chief market strategist at iiTrader, wrote on CNBC earlier this week that a close above the $1,340.90 would provide gold with positive momentum.
— By CNBC.com's Dhara Ranasinghe; follow her onTwitter @DharaCNBC