SAN FRANCISCO (MarketWatch) — The year 2013 put an end to a dozen years of annual gold gains, and the metal’s prospects for recovery in 2014 don’t look great.

Gold futures prices US:GCG4 lost 28% in 2013, the first yearly loss since 2000 and the largest annual loss for gold futures since at least 1984, according to FactSet data tracking the most active contracts.

It’s a tough reversal for investors who hung onto the precious metal in hopes the forces that increased gold prices by seven times by its peak in 2011 from late 2000 — the popularity of gold-backed exchange-traded funds, rising global wealth and worries about inflation — would stoke demand for the natural resource for decades to come.

“Gold has lost its luster as an investment vehicle in 2013,” said Jeffrey Wright, managing director at H.C. Wainwright.

Gold traders and investors spent much of the year fretting over the question of if and when the Federal Reserve would begin to taper its $85 billion-a-month asset-purchase program and they clung onto comments from Fed officials and mulled economic data for hints on the answer.

“The ghost of tapering has been there from March 2013,” said Chintan Karnani, chief market analyst at Insignia Consultants.

On Dec. 18, it came to life. The Fed announced it will reduce the pace of its asset purchases to $75 billion from $85 billion a month starting in January — and if the economy improves at the pace the Fed expects, Chairman Ben Bernanke said he could foresee the bond-purchase program coming to an end by late next year.

By the next day’s close, prices lost over 3% to finish at a more than three-year low under $1,200 an ounce. The metal stayed near that level through the month’s end, settling Tuesday at $1,202.30 an ounce.

Less money-printing “theoretically leads to less dilution of the U.S. dollar, which theoretically leads to less inflation, which logically would be bad for gold,” which is seen as a hedge against inflation, Adam Koos, president of Libertas Wealth Management Group, explained.

“Unfortunately for gold bulls, there is no bottom in sight from a technical viewpoint, so what looked like a bottom-forming range has now broken out to the downside,” said Koos. “Gold buyers should wait till early-to-mid January and take a look at the picture then before they consider opening position at this point.”

An ‘extraordinary’ 2013

The year 2013 certainly started out with promise — and expectations for $2,000 gold prices — but ended with forecasts for declines to $1,000 in the new year.

It was an “extraordinary year for gold,” said Julian Phillips, founder of and contributor to GoldForecaster.com.

“It started well with demand from Asia rising nicely, but then the prospects of stronger economic growth in the U.S. caused U.S. institutional gold investors to see the potential for greater profits in equities,” he said. Losses for gold futures in 2013 compare with a yearly gain in the S&P 500 SPX, -1.11% of 29.6%.

The year 2013 was also a year that gold reacted “negatively to positive news,” said Insignia’s Karnani. “Gold should have risen in 2013 on tapering uncertainty,” but instead they fell, he said.

Gold prices also continued to fall during the U.S. government shutdown in October, which should have resulted in higher gold prices, he said. “If gold prices cannot rise on a [price] positive set of news flows, investors ought to be concerned over gold investment and they will be churning their portfolio for better returns.”

And churn they did. Gold ETFs and the like saw a steady stream of sales taking place in 2013, said GoldForecaster.com’s Phillips. All the while, benchmark U.S. equity indexes hit record levels.

Gold holdings in the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, +0.13% , have dropped about 40% since the start of the year to around 812.62 metric tons in mid-December.

Phillips said he sees gold as having “stumbled.” It stumbled as demand was cut by 25% and as India “blockaded gold imports” and the U.S. increased global supply by 25%, he said.

India raised its import duties on physical gold and gold jewelry, to 10% and 15%, respectively, in 2013 in a move to curb imports and shrink its current account deficit. That reportedly sparked a surge in smuggling.

India was the biggest consumer of gold, but the restrictions resulted in a slump in the nation’s gold imports, said Karnani. India’s gold imports are expected to see a 40% decline in 2013, he said, noting that the country imported 845 metric tons in 2012.

He doesn’t expect the Indian government to ease restrictions on gold imports in the first six months of 2014. The country will hold a general election in April to May of next year and any easing of restrictions on imports would have to be taken by the new government, he said, forecasting that official Indian gold demand will fall further in 2014.

‘Somewhat bearish’ 2014

After a tough price fall this past year, gold investors and traders alike will be waiting for a much-needed lift in 2014.

The gold market will “likely continue to watch the path of the [Fed] monetary policy, but also economic growth in India and China for signs of demand growth,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

Gold sinks to 3-year low

He expects real interest rates to increase in 2014, pressuring gold prices, but he also sees economic growth in emerging-market economies stabilizing, which could lead to better demand growth, if India removes curbs on gold imports.

Overall, he’s generally “somewhat bearish” on gold prices in the new year due to better global economic growth, though he expects the price decline to be more modest and volatile this coming year than 2013’s.

J.P. Morgan cut its 2014 gold-price forecast in December by 10% to $1,263 an ounce, citing Fed tapering and low U.S. inflation. That followed other analyst forecast reductions and downbeat views on the metal.

Yves Lamoureux, president of Lamoureux & Co., a market advisory firm based on behavioral economics, said he expects gold to bounce to $1,500 by the second quarter of 2014 “in tandem with lower interest rates,” but then fall significantly by the end of the year.

Lamoureux’s concerned about the possibility that the Fed has “mismanaged so badly their balance sheet” that the central bank may have to add to its stimulus measures by the summer of next year because of an economic slowdown. In turn, that would “blow the balance sheet to unmanageable proportions,” he said.

Tracking gold’s same behavior from 2013, which saw prices drop even as stimulus measures were in place and interest rates climbed, the metal’s prices may fall against a backdrop of more stimulus and as rates climb even higher, he said. So he’s keeping his $1,000 gold-price target for year-end 2014.

That suggests a second consecutive year of losses is in store for gold, though it probably won’t be as bad as 2013.

Read some of 2013’s best Commodities Corner columns:

2014: Battleground for stocks vs. commodities

Gold miners drop over 50% with no bottom in sight

U.S. oil independence isn’t just a dream

Why investors like silver more than gold

How to invest in the U.S. oil ‘supply shock’

How gold ETFs have transformed the market in 10 years