Investors and traders have gone for gold in the past few months, but some analysts warn that the metal could be set for a drop.
"Gold is a notoriously difficult trade," said Eddy Elfenbein, editor of the Crossing Wall Street blog. "It's a highly speculative bet on the direction of short term interest rates, real rates, and I think with the Fed where they are right now and with the last inflation report, I don't think real rates are going to go any lower for the rest of the year."
Gold lost a third of its value between the start of 2013 and the end of 2015. But in 2016, the metal has become a highly sought after commodity, as the Federal Reserve has avoided tightening interest rates, and the dollar has turned a bit lower. In fact, gold has become so popular that the SPDR Gold ETF (GLD) currently leads all ETFs in net fund flows this year, according to ETF.com.
However, some analysts are suspecting possible action from the central bank that may stop gold's steady climb.
"I think the Fed has made it clear that its bias is towards tightening. I don't know if they will, but that's clearly their bias. So that's why I would stay away from gold right now," Elfenbein said Tuesday on CNBC's "Trading Nation."
Meanwhile, other analysts remain optimistic about the precious metal's rally. In fact, according to Todd Gordon of TradingAnalysis.com, gold is in a win-win situation.
"The way I see it, gold should rally in either of these two situations: One, the Fed is on hold for the rest of 2016 and stocks break to a new high, which should keep the U.S. dollar under pressure, pushing gold higher. Or, if the stock market does fail, gold should act as a safe haven, giving it a bid," Gordon said on "Trading Nation."
Gordon's optimism led him to make a bullish bet in the options market, buying the GLD 120-strike call expiring in June and cutting costs by selling the 122-strike call against it. The trade returns maximum profits if the GLD rises to $122.
That level would mark a 20 percent rally for gold this year, a substantial comeback for the yellow metal.
On the other hand: