Gold sets another record, but poised to slip below $1,200 this month

London (Reuters) After a vintage 12 months which has seen the price of gold shoot up 60 per cent, the metal is likely to slip below $1,200 (Dh4,404) per ounce by the end of 2009 as investors cash in, a Reuters poll showed yesterday.

Gold for immediate delivery gained as much as $10.86, or 0.9 per cent, to $1,226.56 an ounce and hit $1,215.30 in intra-day London trade.

In a survey conducted between Monday and Wednesday this week, 18 of 33 analysts, traders and funds said they expected prices to fall below the psychological marker.

The market's bullish tone is still seen remaining intact, however, as around a quarter of those surveyed see prices ending 2009 in a $1,200-$1,250 range.

Despite price-supportive expectations for further dollar weakness and fresh emerging market central bank buying, the speed of bullion's rally to record highs above $1,225 an ounce has raised fears the market has gone too far, too fast.

"The massive long positions piled up should be unwound to some extent. So, I think the market is somewhat in a weak bias toward the year end," said Naomi Suzuki, senior analyst at SC Asset Management.

One respondent, Darren Heathcote, head of trading at Investec Australia in Sydney, expects to see a still more dramatic correction in prices to a range of $1,050-1,100.

Continuing strength

Seven respondents expect the metal to slip back into a range of $1,150-1,200 an ounce, six more see it dipping into the $1,100-1,150 range, and another four expect it to fall to $1,050-1,100 an ounce. But this remains well above the long-standing record high of $1,030.80 spot gold broke through as part of its current run higher in early October.

The main support for gold is expected to come from prospects for the dollar, with bullion likely to benefit from attempts by central banks and other investors to switch out of the dollar and into other assets.

Eight respondents saw prices ending the year in a $1,200-$1,250 range, fully prepared for extra price strength as 2010 progresses.

"I'd expect buyers to come in to position themselves for continuing strength in 2010," said Charles Kernot, an analyst at Evolution Securities.

Six respondents expected gold to end the year in a range of $1,250-1,300.

See also Page 33