"We would expect the gold price to trade lower on a trend basis this year as the U.S. economic recovery should continue, thereby laying the ground for a less expansionary Fed policy stance and higher real interest rates," Societe Generale's Robin Bhar and Jesper Dannesboe wrote in an April 11 research.
Bulls hit back
But gold's bulls disagree, pointing to dovish minutes from the Federal Reserve's last meeting as a key support for gold.
"The Fed's latest interest rate meetings not only indicate that rates will stay low but that any eventual rise will be tapered, measured and quite gradual," said Scott Carter, the chief executive officer of Los Angeles-based Lear Capital. "Clearly gold has been responding to this accommodative tone."
Gold's technical setup also favors higher prices, Ilczyszyn added. "Gold found major support around the 100-day average of $1,280. Now with a consistent close above $1,300 (the 200-day moving average), the market is poised to move higher."
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This week's U.S. economic data may make or break gold's rally, he added.
"If there are hearty readings across the board, gold could lose momentum,"
Carter said, and has a 'neutral' view on gold for this week.
Edmund Moy, Chief Strategist at Morgan Gold and a former director of the U.S. Mint noted a recovery in physical buying from China and India would help drive gold higher.
Chinese demand "has recovered in April after a record pace in January and February followed by a slump in March," Moy said. "India is also beginning to ease restriction on gold imports, which should result in increased gold purchases from pent up demand from the former top purchaser of gold in the world."