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Gold’s ‘safety’ bid may be capped around $1,300

Tom Grill | Age Fotostock | Getty Images

Benchmark gold prices may post fresh two-month highs this week, possibly breaking $1,280 an ounce, if a slump in emerging markets continues to spark a flight into the relative safety of bullion, a CNBC survey shows.

CNBC's latest survey of market sentiment showed two-thirds of respondents (12 out of 18) expect prices to gain this week, 22 percent (4 out of 18) forecast prices will fall while 11 percent (2 out of 18) expect prices will trade at current levels.

(Read more: Gold benefits amid turmoil in China, emerging markets)

A $10 billion a month cutback in the Federal Reserve's bond-buying program "though modest, has created currency crises in emerging markets," said Scott Carter, CEO of Lear Capital. "Gold is still viewed as a safe haven when currencies are being devalued and has increased due to currency volatility."

AP

Carter added that softer U.S. equity markets hit by weak corporate earnings has caused a spike in the VIX - an estimate of implied volatility of S&P 500 options commonly known as the 'fear gauge' - helping to lift gold further. "When fear enters the market, gold is an asset of choice to hedge against it."

Gold completed its fifth straight week of gains last Friday and though many believe the rally is set to continue, it may struggle to get beyond $1,300, poll respondents said.

Trend Change?

(Read more: The Fed is trapped; buy gold now, Peter Schiff says)

Many strategists said the move higher doesn't yet signal a significant reversal of the down trend following bullion's 28 percent decline last year, which ended a 12-year bull run.

"There's lots of resistance in the $1,280-1,350 area, but a bounce to $1,400-1,500 is not out of the question," said Yoni Jacobs, Executive Director and Chief Investment Strategist at Chart Prophet Capital, an equity investment fund. "No trend change seen yet. Looks like further upside until signs of reversal."

Gold bears maintain continued liquidation in gold-backed exchange-traded funds (ETF) will cap any upside.

"Outflows from ETF holdings of gold and silver positions remain a price threat," said UBS strategists Giovanni Staunovo and Dominic Schnider. "These holdings, once a key source of demand, became a big source of supply to the market last year. A trend reversal in these flows is unlikely this year."

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Despite disappointing economic data from China, the world's largest gold consumer in 2013, consumer demand during the Lunar New Year holiday season will prove supportive for bullion, said Edmund Moy, Chief Strategist at Morgan Gold and a former director of the U.S. Mint.

"Expect minimal impact on their (Chinese consumers') demand for physical gold," Moy said. "Individuals will likely continue their gold purchases to diversify their assets and gold sales have been robust ahead of the Lunar New Year celebrations" starting this week.

(Read more: Gold to tank in 2014: Goldman Sachs - CNBC.com)

China's 2013 gold imports from Hong Kong more than doubled from the previous year to reach a record of more than 1,000 tons as a sharp fall in prices led to unprecedented demand, Reuters reported on Jan 28.

China imported about 1,158.162 tones from Hong Kong, compared with 557.478 tons in 2012, overtaking India to become the world's biggest gold buyer.

By CNBC's Sri Jegarajah. Follow him on Twitter @cnbcSri