The expert believes there is no need for investors to panic in light of gold’s drop to $1322 per troy ounce – the lowest in three months – but says that an exodus from the market will cause prices to dip even further.
"At levels around $1,330, gold may find support if a reversal takes place quickly. However, a failure to hold this level could see lower prices towards $1,300," he said.
"There is a longer term consolidation still in place if gold can turn around its recent bearish play. But if sellers come in with conviction then the metal could fall as low as $1,250 per ounce."
The gold price reached $1,430.95 in October 2010, and many analysts including Jadeja predicted the precious metal to break the $1,500 mark in 2011. While this is still a possibility, the improving outlook for riskier assets has had a knock on effect on gold prices.
The asset tends to thrive in periods of economic uncertainty, illustrated by its stellar performance in the aftermath of the financial experience.
Financial Express data shows the S&P GSCI Gold Spot has returned 82.45 per cent in the last three years, outperforming the FTSE All Share by more than 67 per cent.
Source: Financial Express Analytics
Senior analyst at ETFSecurities Martin Arnold says he has witnessed first hand the shift of investor confidence from gold to riskier equities.
"We have seen outflows from ETFS Physical Gold for the past two weeks now," he said.
"It's of no surprise. Investors are looking to take some meaty profits and look elsewhere for better entry levels, particularly in the equity market. Gold rallied around 29 per cent last year, so it's predictable that investors will look to take profits if gold takes a tumble."
ETFS Physical Gold has returned 42.59 per cent in the last three years, outperforming its Global ETF Commodity and Energy sector by more than 32 per cent.
While Arnold understands why investors are less bullish, he thinks that the macro outlook for the global economy is far from positive, and thinks equities face strong headwinds in 2011. He says gold remains well placed until there has been a sustained period of recovery.
He explained: "The financial crisis was so acute that it will be years before it is fully resolved. We saw a similar fall in gold in 2010 when investors became more bullish, but that was short lived."
"The figures coming out of the US are very promising, but with the sovereign debt crisis in Europe still a major worry, an ailing Euro will provide good support to gold prices."
Paul Duncombe, head of multi-asset investment solutions at Schroders says that he has also seen outflows from retail products, particularly ETFs. However, he thinks it is very unlikely that gold prices will collapse in the near distant future, even if investors continue to pull their money out.
He commented: "I don't believe gold will perform anywhere near as well in 2011 as it did last year. Real yields are now positive, and risk appetite is on the rise. Moreover, the 'currency wars' debate seems to have abated, which means that the appeal of gold has lessened somewhat."
"That said, the outlook for the global economy is far from clear. Even the biggest optimist couldn’t say that we're out of the woods yet. The gold price may drift down, but there is too much uncertainty for there to be a collapse," he added.