For gold bugs, 2013 was certainly a year to forget with the precious metal continuing its remorseless journey lower, a journey punctuated with minor rallies which promised much, but delivered little. To say it was a gloomy end to the year would an understatement.

Roll the year forward into 2014, and things are looking up a little, but for longer term gold bugs, the question is always the same. Is this simply another false dawn, or is our beloved metal going to gain some traction and finally reverse the bearish trend? This is indeed a tough question to answer with any degree of certainty and really hinges on the personality of gold, its underlying characteristics if you like, and whether these have fundamentally changed as the current economic malaise continues to grind into another year. If perhaps we start with the technical picture, and then consider the fundamentals in more detail to try to answer the question.

From a technical perspective, it has been an interesting start to the year, to say the least. The first significant candle was the long legged doji of the 31st December, suggesting a possible pause point in the move lower. This was duly validated early in the new year with gold futures rising strongly from the sub $1200 per ounce level, to test the $1240 per ounce region on Friday. Monday’s price action was volatile to say the least, moving between $1212 to the downside and $1247 on the upside, before finally closing the session with another long legged doji at $1228 per ounce.

The start to the year has been bookmarked between these two doji candles on the daily chart, both of which are sending clear signals of indecision at this level, with today’s price action once again validating the most recent candle, as gold moves lower again to trade at $1228.30 at the time of writing. The worrying sign for gold bugs, is that in both yesterday’s and today’s trading session, the high of each session was capped by the deep resistance now in place in the $1240 to $1260 per ounce region and clearly defined by the volume at price indicator on the left of the chart, with further resistance ahead in the $1310 to $1340 per ounce area.

Moving to the associated volumes for the last few days, these have been mixed to say the least, and reflect the lack of activity following the extended holiday period, with trading volumes only slowing returning to normal levels.

Whilst the daily chart may be inconclusive at present, the monthly chart gives a more balanced longer term view, and from the associated volume here, there is still no evidence of a buying climax by the big operators in preparation for any longer term reversal. The floor of ‘short term’ support is clearly visible on this chart, just below the $1200 per ounce level, and should this be breached, there is little potential support below until we reach the $1100 per ounce region, a price point gold bulls will be hoping is not seen this year. Finally, and perhaps most worryingly, the demise of gold, has not been reflected in the US dollar, with this once reliable relationship having apparently broken down once again. Whilst gold was falling sharply, the US dollar was trading in narrow range for most of the year, between 78 and 85, with price action best described as lethargic.

Moving to the fundamental picture, the problem for gold is that it has few primary drivers at present. Inflation is not on the horizon, and unlikely to be for some time to come. Safe haven status appears to have drifted away as investors have becomes inured to the bad news over the last few years, and in the context of 2007 and 2008, any bad news is simply relative. Safe haven currencies seem to be preferred at present, and with only China propping up demand for the metal at present, the short term outlook remains gloomy. Gold then perhaps is changing its character and moving to one more akin to some traditional commodities, where supply and demand become the key drivers in a journey of price discovery.

Perhaps this is where gold is heading in the short term, where price discovery becomes the real driver and the economics of mining and markets become the focus. Gold will no doubt return to its pre-eminent state, but for the time being, it is in a transitional phase, driven by the unique economics of the last few years. The good times will return, but in the interim gold traders will need to rethink some of their old ideas, and align with the new characteristics of the precious metal.

Equity only readers gain exposure to the gold through the SPDR Gold Shares Trust (GLD, quote) ETF that seeks to replicate the performance, net of expenses, of the price of gold bullion. The GLD trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets.  Readers can also access the gold market through the iShares COMEX Gold Trust (IAU, quote) ETF seeks to replicate, net of expenses, the day-to-day movement of the price of gold bullion.

Anna Coulling is a trader with over 16 years' experience and founder of AnnaCoulling.com