According to a research note by Bart Melek, the firm's head of commodity strategy

Melek says that gold may look to test the $1,300 level ahead of the FOMC meeting later this month before going back up to $1,350 later in the year. He points out that the focus of the market at the moment will be all about the Fed and its rate hikes.

"Given Powell's bullish view on the U.S. economy, increasing chatter of four hikes in 2018 and a potential upward shift in the distribution of the dots next week we would not be surprised to see precious metals take a run at the lower end of the ranges", Melek argues.

However, he says that the weakness will only be temporary as Trump's protectionist rhetoric will favour gold in the long run - and that a slower than expected inflation rise could work in support of gold prices as well.

Melek says that "money managers have been reluctant to reduce their exposure to the shiny metal, and with a 'go-slow' approach from the Fed, we could very well head back above $1,350 in the latter half of the year".