Despite Fall, Gold Still Has True Believers

Photo: Hans-Peter Merten | Photographer's Choice

Is gold's retracement merely a correction, or the end of an era? It all depends on who you ask.

Whipsawed by monetary policy expectations and the U.S.'s Sisyphean struggle to rein in the federal deficit, bullion traded below $1,660 an ounce on Friday, a more than 13 percent decline from its record high of $1920 set in 2011, when Europe's debt crisis was on full boil.

Now, yields in the crisis-battered euro zone have normalized enough for the European Central Bank to keep interest rates steady this week.

Combine that with still dormant inflation and a Federal Reserve that the market believes may be getting nervous about the inflationary outlook, and suddenly gold no longer resembles the one way bet it did just weeks ago.

This week, the pervasive gloom prompted Marc "Dr. Doom" Faber to take a more sanguine view on the yellow metal. The gold bull told CNBC this week he will "never" give up completely on bullion, but he said a deeper correction will send it "10 percent or so on the downside." (Read more: 'Dr. Doom' Faber Sees Possible 10% Gold Correction .)

Yet some gold buyers see the current downtrend as a temporary decline.

John Hummel, chief investment officer AIS Group, thinks that in order for gold's run to be over definitively, investors' "greed gauge" for the metal has to register off the charts. He likened it to the Dot-com bubble of the 1990s, where it seemed as if everyone wanted a piece of a frothy stock market.

There was a "euphoric 'I've got to have some of this'…that hasn't happened," Hummel said. "There's a huge amount of skepticism toward the bull market in gold. The greed gauge has to go a lot higher before" the rally completely exhausts itself, he said.

And the fundamentals still bode for higher gold, Hummel said. Although the ECB held off on cutting rates, the Fed's bond-buying remains intact. Meanwhile, investors are losing faith in paper money, as central banks around the world try and hold down their currencies. (Read more: Gold Can Still Break Through $2,000: Analysts .)

These factors "are driving the price of gold and that will continue to increase, unless there's some sort of dramatic change," Hummel said.

Yet reminiscent of the analyst who once famously predicted the Dow Jones Industrial Average would skyrocket to 36,000, Hummel said that in the very long-term, factors may eventually push bullion to $10,000.

"I would call it a possibility depending upon circumstances that develop. But do I put a high probability on it? No," he said.

Gold above $10,000 puts Hummel in the outlier camp, yet he's not quite alone.

Anthem Blanchard CEO of Blanchard Vault, a retail gold and silver supplier, maintains an eight to 16-year target on gold of $13,000 – an aggressive call even for a gold bug.

Charting data that compares gold's fixing price in London with the monthly average of the Dow, "I foresee the gold-to-Dow ratio eventually reaching 1-to-1 …due to ever-increasing monetary inflation for the foreseeable future," Blanchard said.

Now that's bullish.