With the price of the yellow metal near two-year lows through much of 2013, some investors wonder whether the price decline will continue.
Is this a bear market for gold or will it rebound?
A new report from analysts at Incrementum AG in Liechtenstein says there are good reasons to be bullish on gold, which was trading Wednesday at about $1,252 an ounce.
In fact, the report, titled "In Gold We Trust 2013," set a 12-month target for gold prices at $1,480 and a long-range target at $2,230.
"Even though the consensus is convinced that the gold bull market has ended, we remain firmly of the opinion that the fundamental argument in favor of gold remains intact," the 53-page report stated.
The report said there are no precedents for the current climate of central bank intervention and noted there have been more than 500 interest rate cuts worldwide since 2008.
That makes the need for gold as "monetary insurance" that much more important and will, in turn, push gold prices upward.
"Never before have such enormous monetary policy experiments taken place on a global basis," the report said. "If ever there was a need for monetary insurance, it is today."
The report spells out seven reasons to be bullish on gold:
Reasons to be Bullish on Gold
For the first time, the annual "In Gold We Trust" report - now in its seventh year - included a quantitative evaluation of gold with a wide range of scenarios for U.S. monetary policy. Even weighing factors that could lower the price of gold, the report arrived at the long-term target of $2,230.
Negative real interest rates are still anticipated for the time being. Amid current financial woes, the report predicted the Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank all will continue to keep interest rates at a low level. And historically there's been a strong link between negative real interest rates and gold prices.
"Gold is the only liquid investment asset that neither involves a liability nor a creditor relationship," the report stated, calling gold the "only international means of payment independent of governments" and noting it has survived every war and national bankruptcy.
Unlike the gold market in 1979-1980, when the metal's price soared, it's unlikely the current bull market will end as a result of a major increase in interest rates, given the fact that governments, corporations and households are saddled with heavy debt.
The gold mining industry is undergoing changes to its priorities to put profitability, disciplined capital deployment and stable cash flow per ounce of gold over maximizing gold production.
"We believe that the new commitment to transparent cost reporting, greater financial discipline and shareholder value is a crucial - if quite late in coming -
insight by the sector," the report said. And what of gold mining stocks? The report called them the "ultimate contrarian play."
Skepticism, fear and panic are "never observable at the end of a long-term bull market," said the report. Currently, the report said, "We see anything but euphoria in gold."
A "bottoming process" on gold prices will soon begin, and there's likely to be "very little" momentum before August. After that, gold prices should begin to rise.