Projections for a steady dollar may stall a gold rally. The Dollar Index, which gained 8 percent since the end of October, will reach 80.3 in the first quarter, from 80.6 now, the median of 10 analyst forecasts compiled by Bloomberg shows. The 30-week correlation coefficient between the currency and bullion is at - 0.48, with a figure of -1 meaning the two always move in opposite directions.
Trading Patterns
Bullion's decline since reaching an intraday record of $1,921.15 on Sept. 6 means it is heading for a quarterly average of $1,684. While that's the second-highest in data going back to 1920, it's 10 percent or more below what Societe Generale SA, Barclays Capital and BNP Paribas SA predicted in September. This year's high still managed to exceed the expectations of all but five of 35 analysts and traders surveyed by Bloomberg a year ago, who had a median estimate of $1,700.
The metal closed below its 200-day moving average on Dec. 14 for the first time since January 2009, a sign for some investors who study charts of trading patterns and prices to predict trends that the rout has further to go. Prices have rallied as much as 2.7 percent since then and also gained after breaching the moving average in each year from 2003 to 2009.
Gold's high in September has yet to exceed previous records when adjusted for inflation. The metal peaked at $850 in 1980, equal to $2,335 today, according to a calculator on the website of the Federal Reserve Bank of Minneapolis.
Mining companies are forecast to make the most profit ever. Barrick, based in Toronto, will report net income of $4.72 billion this year and $6.01 billion in 2012, according to the mean of 11 analyst estimates compiled by Bloomberg. Shares of the company, which Bloomberg Industries estimates mines about 9 percent of the world's gold, fell 16 percent in New York this year. It's trading at 9.1 times estimated earnings, down from 13.4 a year ago, data compiled by Bloomberg show.
The drop in gold may spur more buying from central banks, putting a "floor" under prices, said Adrian Day, who manages about $170 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland. The banks may add 600 tons to reserves next year, the most since at least 1970, according to Goldman Sachs Group Inc., which on Dec. 1 said bullion would reach $1,940 in 12 months.
"The bubble is in paper currency creation, not in physical gold," said Ben Davies, the London-based manager of the Hinde Gold Fund, which gained 22 percent in the first 11 months of the year and invests in bullion stored in a Swiss private bank's vaults. "Calls for a top in the market are premature."