"It's not risk free and is not a currency, even though too many people think of it that way," Junkans said in an interview. "It can go down to $1,300, and could also rise to $2,000, but there is definitely a downside potential."
Gold also retreated in September as the Dollar Index, a measure against the currencies of six trading partners, jumped 6 percent, the most in almost three years. The 30-day correlation coefficient between gold and the index is now at -0.45, compared with 0.23 in March, data compiled by Bloomberg show. A figure of -1 means the two move in opposite directions, and 1 means they move in lockstep.
The Dollar Index rose 3.3 percent in the past three sessions on mounting concern that European leaders will fail to contain the debt crisis, spurring demand for what are perceived to be the safest assets, including the greenback and Treasuries.
Some forecasters expect the dollar's rally to fade because of concern that a slowing global economy may force the Federal Reserve to pump more money into the financial system. The U.S. currency will end next year at $1.40 a euro, compared with $1.3756 now, according to the median of 30 economists surveyed by Bloomberg.
Fed Vice Chairman Janet Yellen said on Oct. 21 that a third round of large-scale securities purchases may become warranted to boost the economy. The central bank bought $2.3 trillion of housing and government debt during two rounds of so-called quantitative easing from December 2008 to June 2011, spurring a 70 percent jump in the price of gold.
The metal's plunge in September may signal it is poised to keep rising. The last time bullion had a bigger drop was in October 2008, when prices tumbled 18 percent as the worst global recession since World War II drove equities and commodities into bear markets. The metal rose 23 percent in the next two months.
Investors aren't the only ones buying bullion. Thailand, Bolivia, Kazakhstan and Tajikistan were among nations adding gold to their reserves in September, International Monetary Fund data show. Central banks are expanding reserves for the first time in a generation. Switzerland's central bank said Oct. 31 it returned to a profit in the first nine months as gold holdings helped counter losses on currency reserves.
"There's huge potential for gold in the coming years," said Jochen Hitzfeld, the analyst at UniCredit SpA in Munich who was the most accurate tracked by Bloomberg in the past two years. "Investors are buying gold. That's reinforced by buying from central banks. Prices did run up a little bit too fast, but the drop was just a breather."
Hitzfeld forecast on Oct. 12 that gold would average a record $1,900 in the fourth quarter of next year.
A measure of the combined earnings of the 16-member Philadelphia Stock Exchange Gold and Silver Index will rise 8.3 percent this year and almost 27 percent in 2012, according to analyst estimates compiled by Bloomberg.