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Why gold’s great 2014 performance could continue

Friday, 17 Jan 2014 | 11:08 AM ET
Sterne Agee's case for buying gold
Thursday, 16 Jan 2014 | 1:02 PM ET
Michael Dudas of Sterne Agee explains why gold could mount a minor comeback in 2014, with CNBC's Jackie DeAngelis and the Futures Now Traders.

Gold has enjoyed a strong start to 2014, rising more than 2 percent in the first few weeks of the year. And after closing out the worst year since 1981, gold should continue to stage a mild rebound throughout the rest of the year, some traders and analysts say.

"I'd be careful to say just because one year's bad, the next year's good," said Michael Dudas, precious metals and mining analyst at Sterne Agee. But "the liquidation out of ETFs and out of the hedge funds in gold in 2013—I can't see that happening again given global fundamentals where we are today. … There's a lot more positive than negative to support gold in 2014."

(Read more: Gold poised to snap 3-week rally on economic outlook)

Dudas believes the cost of production for gold and Asian physical demand present encouraging signs, but argues that "the real catalyst this year for a significant move in gold is that we get any monetary velocity back into the marketplace, which we have not really seen since the crash of 2008. I think that fundamentally, that could be the big ticket."

In addition, the fact that gold has outperformed equities thus far doesn't hurt.

In gold, "the sentiment has been so awful, so bad," and yet "the fact that the equities don't seem like they're off to a 30-percent-up 2014 has really had gold holding here pretty nicely. So I do think we could grind higher from such poor sentiment levels," Dudas said Thursday on CNBC's "Futures Now."

(Read more: Byron Wien: 10 percent correction looms–here's why)

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Rich Ilczyszyn of iiTrader agrees that gold is much more primed to rise than to fall.

"We are getting too complaisant with the daily ranges—watch for a breakout," Ilczyszyn wrote to CNBC.com. "Gold has continued to trade in a light range as it waits for a catalyst," but even absent one, "a close above the 50-day moving average and furthermore $1245.50 will encourage a short cover that could lead the market to $1255."

Taking a longer-term view, Dudas sees gold rising to $1,450 within 12 to 15 months.

"That's a couple hundred dollars from where we are today, but it was a price that we saw last May, so it's not too far away," Dudas said.

(Read more: Will gold be 2014's comeback kid?)

Still, not everyone is buying the bull case.

"We're at the high end of a recent range, and I'm looking to sell gold because I don't see inflation. In fact, I see a dollar that's a little bit stronger," said Anthony Grisanti of GRZ Energy. "I just don't see the catalyst that's going to take it higher right now or in the next month."


—By CNBC's Alex Rosenberg. Follow him on Twitter @CNBCAlex.

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