Despite the forecast from Technical Research Advisors and Goldman Sachs Group Inc analysts that gold price would continue to decline this year, hedge funds have increased their bullish gold bets to a six-week high, Bloomberg reported. Data from the US Commodity Futures Trading Commission showed that in the week that ended December 31, the net long position in gold increased 19% to 34,104 futures and options. Short holdings declined 4.6% to 72,571, its lowest since November 19. As investors turned most bearish on sugar since September, the net-bullish holdings on 18 US traded commodities dropped for the first time in six weeks.

Last year, gold fell 28% after investors lost its faith in it as a store of value. This was the metal's first drop in 13 years and the largest fall it experienced since 1981. Louise Yamada of Technical Research said the bullion is set to drop another 19% in the next few months to $1,000 an ounce. Yamada also worked Citigroup Inc as its former head of technical research.

San Francisco-based Permanent Portfolio Family Funds Inc Manager Michael Cuggino told Bloomberg, "With gold, in the short-term, we're being pulled in multiple directions. There were sellers trying to get out in front of the tapering. Physical demand is OK, but not strong. You also have increasing economic activity, which could begin to accelerate inflation." Cuggino manages an estimated $10 billion worth of assets.

On December 31, gold dropped to $1,181.40. Bloomberg news surveyed analysts where 15 analysts said they expect gold to increase this week. Two are bearish about the bullion while four are neutral. The report said that since December 2012, this survey had the highest proportion of bulls.

In a telephone interview, Yamada told Bloomberg, "The market still looks very weak. There is potential for further declines, and it's too early to say if the market has a double bottom in place."