While fears over the stability of paper currencies and inflation may keep gold high, it will struggle to maintain the soaring investment flows that took it to an all-time peak of $1,226.10 an ounce in December, analysts say.
In the short term, gold's underlying fundamentals look fragile as jewelry demand languishes and miners lift supply. Spot prices had retreated from their December highs to around $1,076.50 an ounce by early afternoon on Wednesday.
"We see a number of headwinds for investors in gold, most notably potential increases in rates," said RBS Global Banking & Markets analyst Daniel Major. "The opportunity cost of investing in commodities is going to be important."
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