(Bloomberg News) Investors are reducing gold holdings for a third month, the longest stretch since 2004, and favoring the dollar as a haven from Europe's debt crisis, even as Goldman Sachs Group Inc. predicts record prices for the metal.

Bullion erased its gains for 2012 this week as the dollar rose against a basket of currencies for a record 12 straight days. Gold held in exchange-traded products fell 30.8 metric tons since reaching a record 2,410.2 tons on March 13, data compiled by Bloomberg show. Royal Bank of Scotland Plc, ABN Amro Bank NV and Barclays Plc cut their forecasts in May, though Goldman expects prices to rise 25 percent to $1,940 an ounce in 12 months.

Gold rallied for 11 consecutive years and prices rose more than sevenfold, with demand accelerating in 2008 amid the global recession. Now, mounting concern that Greece may exit the 17- nation euro and prospects for faster U.S. growth are boosting the dollar, making it more attractive than bullion to some investors seeking to protect their wealth. Hedge funds are the least bullish on the metal since December 2008.

"Gold is just another risk asset," said Michael Aronstein, the president of Marketfield Asset Management in New York, who predicted the 2008 slump that drove commodities down 66 percent in seven months and then the rebound in 2009. "It made you a lot of money if you took the risk eight or 10 years ago. A real safe haven would be a pile of high-denomination Swiss franc or dollar notes, stored in a safety deposit box."

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Futures dropped 1.1 percent this year to $1,549.10 on the Comex as of 10:40 a.m. in New York. The Standard & Poor's GSCI Index of 24 commodities declined 1.3 percent, and the MSCI All- World Index of equities climbed 2.4 percent. The Dollar Index, a gauge against six major trading partners, added 1.3 percent after retreating as much as 2.6 percent. Treasuries returned 1 percent, a Bank of America Corp. index shows.

Bullion slid as much as 21 percent from its intraday record in September, the common definition of a bear market. On a closing basis, futures need to settle at $1,513.52 an ounce to record a 20 percent drop from its August peak.

Gold's correlation to the Chicago Board Options Exchange Volatility Index, a measure of U.S. equity derivatives known as the fear gauge, has now dropped to near zero after moving in lockstep as recently as September, when New York futures touched a record $1,923.70 before plunging 19 percent. The 30-week correlation coefficient between the greenback and bullion is now at -0.66, compared with -0.24 in September, with a figure of -1 meaning the two move opposite to each other.

Barclays, RBS

The metal will average $1,740 in 2012, compared with $1,673.76 so far this year, according to the median estimate of 11 analysts tracked by Bloomberg since March. Barclays cut its outlook by 8 percent to $1,716 last week and RBS lowered its forecast by $25 to $1,725 on May 4. ABN Amro said May 2 its prediction dropped to $1,550, from $1,600 in January.

The European Central Bank will be forced to pump more money into the euro region in response to the debt crisis, reviving the appeal of gold, Hussein Allidina, the head of commodity research at Morgan Stanley in New York, wrote in a report May 14. The ECB already flooded markets with more than 1 trillion euros ($1.28 trillion) to avert a credit crunch. Prices will rebound to an average of $1,825 this year and $2,175 in 2013, Morgan Stanley forecasts.