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Gold gains ahead of Chinese New Year

Gold enjoyed its third straight session of gains on Monday with industry experts predicting a little more shine for the precious metal with the Chinese holiday period just around the corner.

The price of spot gold rose by around $6 at the start of the session before easing back a little as European trading hours got under way. The price was at $1,232.40 per ounce by 12.30 p.m. GMT and has clocked a gain of over 4 percent since the start of the year.

Brad Gordon, the CEO of Acacia Mining - a gold mining business operating in Tanzania - said that the feeling in his industry was generally subdued but it is still optimistic that the price was about to head higher in the short-term.

"There's a general feeling the gold price is heading northwards ," he said, explaining that he had just attended the Investing in African Mining (Indaba) in Cape Town last week.

Gold rings
Park Ji-Hwan | AFP | Getty Images

"I don't like to predict what the gold price will do - our focus is more on the other side of the equation which is on cost. But I think there is a general feeling the situation is getting better."

Analysts highlighted Monday that concerns over Greece's debt negotiations, as well as the U.S. dollar which was tracking lower against a basket of currencies at the start of the week, had supported the precious metal in recent sessions.

In the 10 years up until December 2012, gold had surged around 400 percent, with the help of low interest rates, extra liquidity from the Federal Reserve and concerns over the global economy. However, the precious metal has since lost 30 percent with the Fed - along with the Bank of England - looking to raise interest rates. Often seen as a hedge against inflation, gold traditionally has had an inverse relationship to interest rates with demand for the precious metal increasing when rates are low.

However, aside from price speculation and exchange-traded funds, it's Chinese and Indian consumers that are major buyers and often prop up the price. And this could be about to happen again, according to Adrian Ash, the head of research at online gold exchange BullionVault.

The Chinese New Year - celebrated this year on February 19 - marks the peak period for Chinese households to buy gold, he said.

"Official 'Year of the Goat' gold coins minted for the People's Bank of China are already sold out, and reports are spreading of gold-plated fakes being sold to unwary older-aged buyers," Ash said in a research note on Monday morning.

Nonetheless, Ash stated that it's important to remember that China's huge demand for gold responds to moves in world prices and doesn't set them. While other analysts admit that the worst price fall for gold may have already happened, some aren't as optimistic on the precious metal as Acacia's Gordon.

Kit Juckes, global head of foreign exchange strategy at Societe Generale, told CNBC Monday that gold is not going back up in any "meaningful fashion anytime soon." Meanwhile, Nour Al-Hammoury, the chief market strategist at ADS Securities in Abu Dhabi said in a note that a medium term retracement might continue towards $1,200 an ounce, before the years positive trend resumes.