U.S. gold futures for April delivery were at a four-month low Wednesday, sliding as the dollar rallied. On Thursday, gold edged higher as the dollar retreated and the euro strengthened. The dollar’s rise has also usurped expectations that gold could act as a hedge against inflation, as the rising dollar deflates commodities prices.

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“Basically deflationary impulses and a strong dollar and relative strength in paper assets and the Fed shift are the major headwinds, and they are preventing any kind of functioning gold rally,” said Steel.

The dollar index has gained more than 9 percent this year, and currency strategists expect it to continue in an uptrend as the Fed moves toward hiking interest rates. The Fed meets next week, and the dollar has moved sharply ahead of that meeting.

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The Fed is expected to change the language in its statement, setting the stage for a rate hike in June or September. The prospect of higher U.S. rates comes as other global central banks ease, a combination that has supercharged the dollar’s gains.

“Even when gold was moving towards $ 1,300, we were still maintaining our bearish view that it will resume its downtrend sooner rather than later because the Fed was going to normalize monetary policy, which would imply a stronger dollar and higher bond yields that would likely dim the attraction to gold,” said Robin Bhar, head of metals research at Societe Generale.

Bhar has a bearish view of gold and expects it to trade down to between $ 1,000 and $ 1,050 per ounce. “We think when the Fed starts to raise rates, it could raise them in a much more quicker fashion than the market is pricing in. We think there would be more evidence of inflation as some of the Fed speakers have been suggesting,” he said, noting wage inflation could pick up.

“We believe gold investors should be cashing in, as they appear to be doing, putting their money into higher yielding assets like equities,” Bhar said.

Bhar said the top end of his range would be $ 1,200, or $ 1,250 an ounce.

Steel is less negative. His target at the low end is $ 1,120.

“I think we’ll have enough physical buying to keep us above that level,” he said. The top end of his range is $ 1,305, and he said it’s possible emerging market buyers could be attracted at low levels.

But Bhar says emerging market buyers will find gold more expensive in their home currencies. “They’ll come in and support it. … It won’t be enough to reverse the trend,” he said.

Steel said there was some emerging market demand at around $ 1,200 before Chinese New Year. “These are relatively attractive prices even though in local currency terms, gold is not as low as it is in dollar terms. … If we get some sort of a dollar respite in the rally, that probably would put the foundation in for a little bounce in gold,” he said.

When gold gets low enough, jewelry buying also picks up, with China and India making up more than 60 percent of the market.

“U.S. jewelry sales have been pretty good compared to others in the developed world, and I think they’re likely to remain strong. These prices are also good for coin demand, which is a considerable piece of the gold market,” said Steel.

In gold’s favor are “limited increase in mine supply, very strong gold demand below $ 1,200, good coin demand and a low level of scrap,” Steel said.

Steel said if the dollar were to become too extreme where it could be damaging to the world economy, investors could seek a new safe haven. Gold could be the likely choice.