Hedge funds and other large speculators reduced bearish bets by 17 percent last week, U.S. Commodity Futures Trading Commission data show. The 14 most widely held options confer the right to buy gold at prices higher than today.

Gold will average $1,350 in the fourth quarter next year, according to the median in the Bloomberg survey. Commerzbank AG and UniCredit SpA see prices at $1,600, while Bank of America anticipates $1,652.

Demand for jewelry, coins and ingots contrasts with record sales from ETPs, which at the peak in December held 2,632.5 tons, more than the official reserves held by all but three central banks. The funds now own 1,949.2 tons valued at $85.4 billion, $56.3 billion less than at the end of December, data compiled by Bloomberg show.

Most Accurate

Danske Bank A/S, the most accurate gold forecaster tracked by Bloomberg over the past two years, raised its estimate for next year’s average to $1,138 from $938 on Aug. 20. Its fourth- quarter 2014 prediction of $1,100 is still 19 percent lower than prices today. Credit Suisse Group AG, Citigroup Inc., ABN Amro Group NV and Macquarie also anticipate declines.

Societe Generale SA and Goldman Sachs Group Inc., both of whom correctly predicted the rout that began in the second quarter, are also bearish. The French bank expects a 2014 average of $1,150 and New York-based Goldman says prices will retreat to $1,175 in 12 months.

Gold slumped this year in part because of investors’ expectations the Federal Reserve will taper stimulus as the U.S. economy strengthens. The metal rose 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system by purchasing debt, increasing investors’ concern about currency debasement and accelerating inflation.

Biggest Investor

A Bloomberg survey this month showed that 65 percent of economists expect policy makers to reduce the $85 billion of monthly asset purchases starting in September.

Paulson, the biggest investor in the largest ETP, cut his stake by 53 percent to 10.2 million shares now valued at $1.36 billion in the second quarter, according to a filing to the U.S. Securities and Exchange Commission. The 57-year-old hedge fund manager, who told investors as recently as last month that they should own gold, cut the holding “due to a reduced need for hedging,” New York-based Paulson & Co. said in an e-mail.