Gold prices went down for the second straight trading session. The asset still has upside potential and could rise to $2,000, according to the outlook by Goldman Sachs.

Following a 0.1% downtick on Monday, gold touched the June high of $1,879.50 on Tuesday, but fell by 0.7% or $12.50 and closed at $1,854.10.

The precious metal failed to consolidate at a 5-month high. Gold was pushed down by the rising dollar and the latest US economic data. USDX gained 0.4%, reaching the 16-month high.

US industrial production data increased by 1.6% in October, surpassing the projected 0.8% gain. Retail sales also beat expectations, growing by 1.7%. Economists forecasted a 1.5% rise.

The report shows consumption can handle high prices and remains quite strong, which is positive for risk appetite but creates an obstacle for gold, OANDA analyst Edward Moya said.

Moya noted gold could rise further towards the key target of $1,900, but the stronger dollar would put pressure on the asset.

Gold price dynamics will depend on the sentiment of short-term investors and buyers from Asia, which are currently following a wait-and-see tactic, Chintan Karnani, director of research at Insignia Consultants said.

"Short-term gold investors and physical gold buyers (in Asia) will buy only if they are convinced that gold price has the juice to float over $1,900", he said. Otherwise, the asset could test the $1,825.30 and $1,793.30 levels.

Despite the current slump, gold still has upside potential stemming from continuing inflation concerns.

"The notion that U.S. inflation has yet to peak should keep bullion well bid, as long as the Fed doesn't veer from its patient approach to any rates lift off," said Han Tan, chief market analyst at Exinity.

Outlook by Goldman Sachs

High inflation would be the main catalyst for gold prices, said Damien Courvalin, head of energy research at Goldman Sachs.

Demand for gold as a safe-haven asset has fallen over the past 6 months, as investors considered growing inflation to be transitory. However, inflationary pressure is now more likely to persist longer than previously anticipated, which may boost demand for the asset, he noted.

The investment company projects that gold would rise by 7% and reach $2,000 per ounce by the beginning of 2022. Growing inflationary risks could accelerate the price further, Courvalin commented.

Rising demand for cryptocurrencies may be detrimental for the asset, alongside other risks such as inflationary pressure and rate hikes by the Fed, the analyst said. Crypto could be more desirable for investors as a safe-haven asset as it can be used as currency, among other factors.