Nearly half predicted that the gold price will fall to $1,450 per ounce in the first quarter of 2012

The gold price climbed $18.19, or 1.1%, to $1,610.87 per ounce Tuesday closing as the U.S. dollar declined against a basket of the world’s leading currencies. Silver advanced alongside the the price of gold by $0.57, or 2.0%, to $29.36 per ounce, as the commodities complex was bolstered by the weaker dollar.

With the current year winding down, Reuters polled 20 hedge fund managers, traders, and economists on their outlook for the price of gold in 2012. Given the considerable sell-off in recent months, it was not surprising that most respondents were quite cautious on the yellow metal’s prospects for next year. Nearly half predicted that the gold price will fall to $1,450 per ounce in the first quarter of 2012, and that gold is unlikely to reach a new all-time high until at least the third quarter.

Reuters cited “a lack of immediate monetary easing or stimulus programs by central banks” as the primary reason respondents were bearish on gold’s prospects in 2012. Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital, commented that “To me, gold is not attractive right now because we don’t see any inflation threats.”

The gloomy outlook of the Reuters poll echoed other recent measures of gold sentiment, including MarketVane’s Bullish Consensus reading. At 58%, the MarketVane report came in at its lowest level since December 2008, immediately after the depths of the financial crisis. Last week the Hulbert Gold Newsletter Sentiment Index (HGNSI) reached 0.3%, indicating that “the average gold timer is essentially keeping all of his gold-oriented portfolio out of the market,” according to HGNSI founder Mark Hulbert.

While the sentiment data reflects investors’ somber mood toward gold, a contrarian perspective indicates that now is far from the time to be turning bearish on the gold price. Throughout the 11-year bull market in gold, extremely low sentiment levels – as witnessed currently – have been associated with intermediate-term bottoms in the price of the yellow metal. Although it is quite difficult for investors to pick the exact bottom in the gold price, the data suggests that the risk-return setup for gold has become quite favorable at the present time.

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