Demand for gold could also increase as an inflation hedge when the Federal Reserve raises rates as a result of inflation picking up, Jessop said.
Another factor for the metal is global central bank buying, led by Russia. The Russian central bank has been bulking up its gold supply in an effort to diversify away from U.S. dollar holdings, which will also likely support the price of bullion this year, according to analysts at the group.
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Inflows into gold exchange traded products, or securities that track an index or asset, have also ticked higher in the last week according to data from ETF Securities.
Last week there was a $5 million net inflow into long gold ETPs as well as around $10 million out of short gold ETPs, or products used to predict a fall in the price of gold.
"Gold is still viewed as a very defensive safe haven asset, but I guess at the margin, that U.S. dollar strength has limited any upside," said director of research at ETF Securities, Martin Arnold.
"In the last week, we have started to see more inflows into gold, modest inflows, but that's generally how it starts. We did see more optimistic positioning in terms of the flows, people taking their shorts off and adding to longs," Arnold said, who sees gold trading up from current levels of around $1,180 to $1,300 by the end of the year.