Gold may test this level as 'flight to safety' fades

Sunday, 13 Oct 2013 | 8:42 PM ET
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Gold prices may fall towards $1,250 an ounce this week as a possible resolution to raising the U.S. debt ceiling, staving off default, shores up the dollar and undermines the precious metal's safe-haven status, according to CNBC's latest market survey of traders, analysts and strategists.

CNBC's latest poll of gold market sentiment showed 83 percent (15 out of 18 respondents) expect prices will fall this week, 11 percent (2 out of 18) predict price gains, while a single respondent sees prices trading around current levels.

Many, however, called gold's status as a safe harbor into question as the asset failed to attract buyers even when the dollar weakened and the U.S. shutdown dragged on.

(Read more: Why gold is set for a 20% rally)

Why isn't gold rising as a safe-haven trade?
Sean Hyman, Editor of Moneynews, Ultimate Wealth Report explains why gold hasn't responded to Yellen's nomination. He calls the gold sell-off a pullback and expects prices to hit $1,500-$1,600 soon.

Bullion on Friday hit $1,242.10 at one point during the session, its lowest level since July 10.

(Read more: Gold's plunge blamed on one massive sell order)

"Gold is being taken out to the woodshed yet again today and we can expect to see continued weakness if the debt ceiling and government shutdown are resolved," said Kevin Kerr, President and CEO of Kerr Trading International on Friday.

"Gold has really failed in terms of performance as a flight to quality vehicle."

Sub-$1,300 gold "technically is extremely weak and a test of $1,200 is likely should this trend continue," Kerr added.

CNBC's Sri Jegarajah. Follow him on Twitter @cnbcsri