There has been little sign of gold's famed allure of late, with a sharp sell-off sending prices to a two-month low and taking the shine off its prospects.
After prices charged up to a record $1,264 at the close of June, gold bulls were citing unprecedented heights of $1,400 before year-end amid signs of growing investor demand.
But their bullish forecasts proved short-lived as investor demand tailed off and prices dropped to a two-month low.
So why has gold lost its Midas touch recently?
Gold stocks had been outperforming markets on the back of defensive sentiment for the past year, and fears of contagion effects from the Greek debt crisis and risk aversion.
However, the past few weeks have seen a downturn in speculative interest and reduced physical buying. This has caused prices to slump to a two-month low of $1,175 an ounce - some 6% lower than its lifetime high and a far cry from the $1,400 price tag cited just a couple of months ago.
While investors were happy to engage in a spot of bargain hunting during a dip, the market has failed to ignite aggressive buying or indeed staying power.
As a result, gold has failed to carve out two consecutive "up" days since 25 June or indeed breach the psychological $1,200 barrier for the past four sessions, highlighting the continued liquidation in the market.
Meanwhile, the world's largest gold-backed exchange traded fund, SPDR Gold Trust, reported a drop in its holdings for the second week, after soaring to a record high of 1,320.436 tonnes at the close of June.
What effects have currency movements had?
The conventional theory dictates that wherever the dollar moves, gold is likely to head in the opposite direction.
However, with the European crisis having stabilised of late and a spate of strong eurozone data sparking a rebound in the euro, it would seem gold is breaking with tradition.
Brad Yim, portfolio manager at Castlestone Management, explains: "I see this rally in euro not necessarily as dollar weakness, but more as restoration of faith in fiat currencies in general.
"Gold benefited from the European sovereign debt crisis as euro's status as the second leading reserve asset eroded. And naturally, some restoration in that lost confidence has served as a negative drag on the gold price lately."
While gold may have carved itself a niche in the market as a safe haven asset from currency volatility, some believe its value has been exaggerated.
"Gold prices already include a large premium as a refuge from economic and financial uncertainty," say analysts at Capital Economics. "For example, gold looks expensive compared to other safe havens, including inflation-protected US government bonds."
In a further blow to gold's status, the market has suffered a somewhat knee-jerk reaction to elevated deflation concerns, which have prompted some investors to liquidate their hard assets.
How are demand levels holding up?
While the sharp correction has seen prices plunge below the all important $1,200 mark, analysts maintain that growing demand from the emerging markets will help raise prices in the future.
The World Gold Council published data revealing that together, India and China invested some $87,121 billion over the course of 2009, up from $82,294 billion a year earlier.
This year alone, gold investment demand in China - currently the world's second largest consumer - soared 59%, surging to a record high in June as investors sought to protect themselves against the government's efforts to cool the property market.
While the June-August period typically denotes a quieter time for the precious metal, China's Gold Association said it expects to see the country's demand to rise by between 11 and 12% this year to around 440-450 tonnes.
Despite a cooling off in gold-backed exchange traded funds (ETFs), analyst Suki Cooper at Barclays Capital notes that the figures are still strong and suggest long term faith in the yellow metal.
Evidence can be found in Tokyo's new gold-backed ETF, which listed on 2 July and has since got off to a lively start, with Mitsubishi UFJ Trust and Banking Corp predicting that assets held could increase eight-fold within a year as investors seek to protect their wealth.
"Longer term investor interest remains robust with physically backed ETF holdings wells above 2000 tonnes and setting fresh records.
"Meanwhile, US coin sales more than doubled year-on-year in May. In our view, continued strength in investor appetite will drive prices higher and the motives for buying gold remain intact for now," Cooper said.
Where now for the gold market?
Capital Economics takes a somewhat bearish view to the market, warning that it would take a "major new shock" to propel prices significantly higher in the near future.
"It is not difficult to think of candidates for just such a shock, including the threat of EMU break up, renewed doubts about the creditworthiness of a major country such as the US or Japan, and the risk of a trade war between China and the West.
"But none of these risks are likely to come to a head over the remainder of this year," analysts believe.
However, Cooper, along with others, says that while the summer months are likely to see upward momentum capped due to the liquidation, she believes gold bulls will still enjoy their fruits further down the line.
"We do expect continued investor interest in gold to drive prices higher as the year unfolds, however, near-term long liquidation given elevated speculative length could cap upward momentum in the seasonally softer summer months.
"While upward momentum is capped by softer investor interest, in the face of record high prices an easing of prices would attract physical buyers and we see jewellery demand providing a cushion for prices above historical levels," she added.
Barclays Capital is forecasting $1,215 an ounce for the third quarter, shifting upwards to $1,260 an ounce in the final three months of the year.
US banking giant Goldman Sachs is slightly more bullish in its take, forecasting prices in the region of $1,220 within the next three months and $1,335 an ounce in 12 months' time.
Brad Yim agrees with these estimations, believing that the macroeconomic environment will continue to kick up uncertainties despite a recent run of strong data.
"Looking ahead, the exceptionally low interest rate environment provides a highly favourable macro backdrop for gold. I believe the concern over European sovereign debt situation is far from over and this remains a source of significant upside surprise for both the dollar and gold."
The only downside to such a situation would be Federal Reserve tightening in the US, but with chairman Ben Bernanke in favour of continued short-term stimulus, there is little chance of this occurring within 2010.
Analysts at Societe Generale sum up: "For the longer term, the markets will remain acutely concerned over European solvency and the possibility of further contagion, while the inflationary pressures on the horizon have not abated.
"While we expected this correction, we believe that gold will remain under upward pressure in the second half of the year and be above $1,300 by the start of the fourth quarter."
So, while corrections in the gold price can often be sharp and severe, analysts believe in its upward trend. Indeed, the precious metal looks on track to rise for the tenth year in succession.
