Futures & Commodities

2017 could prove to be gold's 'magic' year

Gold might have lost 40 percent of its price over the last four years, capping a stellar 10-year bull run, but analysts are already predicting a possible bottom for the precious metal.

Hovering around a five-year low on Thursday at $1,102 an ounce, gold has been hit by low inflation, a stronger dollar and fears over Chinese demand. The precious metal has recently seen its longest losing streak in nearly two decades and a rout on Monday led to its deepest losses in nearly two years. (Tweet this)

Many analysts like Sandy Jadeja, chief market strategist at Signal Pro, see more short-term bad news for bullion. But, he told CNBC this week that 2017 would be where he starts "stepping in" to add more to his portfolio.

Equities exhausted?

Akos Stiller | Bloomberg| Getty Images

"My view is that the equity markets will have really exhausted themselves (in 2017)," he said.

"I would expect the equity markets to come off (in 2017), people coming back (to gold) from a sentiment point of view, thinking maybe gold prices are so low right now maybe it's time to go back in and hedge on equities."

Jadeja said that $945 an ounce would prove to be a "very key target" in the next two years before the predicted buying.

Meanwhile, Lynnden Branigan, technical strategist at Barclays, told CNBC that $1,033 and $1,043 are his next downside targets but added that the psychological $1,000 figure would be the "magic number."

The 'magic number'

Gold could test $1,050 by early September: Pro

Often seen as a hedge against inflation, gold traditionally has had an inverse relationship to interest rates. Monetary stimulus of this kind can stoke inflation, according to many experts, and thus the demand for the precious metal usually increases when rates are low.

However, global inflation has been lifeless in recent months and the gold price has suffered. But, this could be about to change.

Christopher Swann, a cross asset strategist at UBS Wealth Management, believes that inflation will outpace only moderate rate rises by the U.S. Federal Reserve next year. He believes that things will get better for gold after some initial weakness in the shorter term.

"We would anticipate that the low price of gold at the moment is going to draw in more buyers from India and China." he said in a client note on Thursday.

He also noted the cost of extracting bullion is reached when it falls to between $1,000 and $1,100 per ounce. Hence, miners would cut back on production and provide an extra floor for the price.

"We would expect the gold price to stabilize in 12 months," he said.

'Buy gold' spikes

Beware, gold prices will continue to fall: Expert

Away from the big money flows on exchange-traded funds, there seems to be a slight change in sentiment by private investors.

BullionVault, a U.K.-based online gold exchange, has noted a rise in demand. Tuesday ranked as one of the highest for new account openings so far this year, Adrian Ash, head of research at the company, said in an email.

BullionVault also saw its heaviest trading volume since October 2014 on Monday and Google has seen a spike in the search term "buy gold".

—Additional reporting by CNBC's Arjun Kharpal.