Gold prices will fall on average in 2009-2010 after hitting a record this year on expectations 'de-hedging' by producers will slow and the dollar will appreciate, the National Australia Bank said.
Bullion will average $900 an ounce in 2009 and $825 in 2010, after rising by 23 per cent to $920 this year, the bank's minerals and energy economists said.
Gold will be pressured as the US dollar appreciates with the recovery of the US economy next year and the potential negative impact on European economies of European Central Bank interest rate increases, Burg said.
"This is likely to place some downward pressure on dollar denominated gold prices, combined with a reduction in de- hedging," said Melbourne-based Burg.
Gold for immediate delivery has gained 44 per cent in the past year reaching a record of $1,032.70 an ounce on March 17 on a weaker dollar and as miners reduced their forward sales, or "de-hedged," reducing the availability of spot material.
"De-hedging is likely to slow in coming quarters," Burg said. "All else being equal, this will boost spot gold supply," he said.
"In the short term, gold prices are forecast to rise moderately in line with concerns around energy markets and geopolitical tensions in the Middle East," Burg said. "Any further weakness in the US dollar is also likely to contribute to upward pressure in gold prices."