Gold jumped to a seven-month high of $671.85 an ounce on Wednesday as the dollar hit a six-week low against the euro after U.S. Federal Reserve Chairman Ben Bernanke said inflation pressures were starting to ease.

Gold is often used as a hedge against fluctuations in the dollar, so moves inversely to it.

Long-term sentiment was bullish, but in the near future gold may fall before it rises again, analysts said.

"We remain positive on gold and forecast the metal will average $700/oz this year, based on a combination of gold market fundamentals -- primarily due to a much improved buying from the physical market and the material chance of lower net central bank sales -- and expectations of a weaker USD," John Reade, head of metals strategy at UBS, said in market report.

"But gold has moved too high, too quickly and, to be blunt, the wrong types of investors own it."

Short-term speculators who have bought gold are likely to sell it once the price rises in order to make a quick profot.

Technical signs on the charts also indicated a short-term pullback was likely en route to its July high of $677 and beyond.

"Into here we expect the market to struggle short term, but bigger picture, we remain steadfast bulls," analysts at Barclays Capital said.