“Gold has certainly been in a bear market prior to today and continues to be, regardless of the rally,” said Adam Koos, president of Libertas Wealth Management Group.
Prices climbed on Monday and continued its rise on Tuesday as investors eyed developments in the standoff between Greece and its creditors as well as the U.S. Federal Reserve monetary policy statement due Wednesday.
The rally was “remarkable not just for
its degree, but also for the lack of a clear precipitating factor,” said
Brien Lundin, editor of Gold Newsletter.
There was some short-covering involved, but it may have also been a “bit of a reaction to heavy short-selling that we saw on Friday.”
Gold prices are expected to "stall after more wishy-washiness” out of the U.S. Federal Reserve meeting, which concludes Wednesday.
As the U.S. dollar DXY could continue to decline, helping to push the yellow metal up, “it’s going to take a lot more dovishness out of [Fed Chief Janet] Yellen to cause a spike north of $1,220 an ounce” for gold, said Koos.
Eventually, the Fed will be forced to raise rates eventually, the analyst added, as if the hike does not come as a result of the healing economy, then it will be due to the central bank's addiction to spending.
“With the budget being out of whack, and with enough time, they’ll likely spend themselves into an inflationary environment that will also warrant a bump in rates.”
In their latest notes, Morgan Stanley forecasts an average gold price of $1,180 an ounce for 2015, while Barclays expects an average price of $1,182 for gold this year.
There is still a hope, however, that gold could see a surge.
Capital Economics predicted that a “Grexit” could send gold to $1,400 by the year’s end.