While gold has room to drop further in the short term, it's headed higher over the long run, says Ed Moy, chief strategist at Morgan Gold, an Irvine, Calif.-based investment firm.
"When you take a look at gold at $1,200 that's a relative bargain compared to all the overpriced stocks," he tells
Bloomberg. "And given the extremely strong demand from Asia, which was at an historic high last year, those should put some upward pressure on gold in the long term."
Comex February gold futures traded at $1,237.70 early Tuesday. The precious metal plunged 28 percent last year.
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Asians have a natural affinity for gold, Moy says, noting that his Chinese parents own the precious metal, as does he.
"Gold is part of the Asian mindset that it is a . . . way to store your wealth," explains Moy, former director of the U.S. Mint and a Moneynews contributor. "As both India's and China's middle class grow, that middle class is anxious to diversify their wealth, given their governments and banking systems."
That means continued strong gold demand in Asia, which will boost overall global demand to a record high this year.
In the first half of 2014, gold will likely trade in a range of $1,100 to $1,300, he predicts. The second half of the year will likely see bigger price moves and an appreciation in gold.
How the Federal Reserve proceeds on tapering its bond buying will affect gold, he notes. The Fed decided last month to start cutting its monthly purchases by $10 billion, leaving them at $75 billion.
"The Fed has pretty much painted itself into a corner," Moy argues. "It has to be careful that the economy is not going too slow but not too fast. That's a whole middle ground, and government's not really known for being a fine-tuned instrument."
So there could be "unintended consequences" that will affect gold.
If inflation becomes a problem, that could help the metal, he says. Military intervention in Iran or elsewhere in the Mideast also could boost gold.
On the other hand, if economic growth accelerates moderately and inflation doesn't turn into a problem, that could hurt gold, Moy asserts.
In general, gold provides investors a nice hedge against a weak dollar, because gold generally rises when the dollar falls, he states.
In addition, "it's just part of good diversified investment strategy to not only have your wealth in assets like stocks, bonds and cash, but also in tangible assets, like gold," Moy maintains.
In a sign that gold has indeed retained its appeal among individual investors, sales of gold coins have been soaring, even as the metal's value has dropped,
The Wall Street Journal reports.
Gold coin purchases jumped 63 percent to 241.6 metric tons in last year's first three quarters, according to the World Gold Council.
Coin purchasers generally are small investors who seek gold as insurance against financial crises, Bart Melek, a senior commodity strategist with TD Securities, tells The Journal.
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