Gold pared gains on Thursday after hitting a record near $1,600, as the dollar erased losses after Federal Reserve Chairman Ben Bernanke crushed speculation that another round of monetary easing was on the way. A Reuters poll showed that analysts expect gold prices to average $1,550 an ounce in 2012, driven by waning confidence in the strength of global economic recovery and concerns over eurozone debt.
Bullion's reversal on Thursday may thwart its longest winning streak in nearly five years, fuelled by fears that the eurozone crisis is spreading to Italy, and mounting uncertainty over a US debt deal after Moody's said the world's largest economy may lose its top credit rating.
"The dollar, which is so oversold and sentiment is so bearish because of a potential downgrade from Moody's, went through a reversal against every currency, and gold is caught up with that," said James Dailey, portfolio manager of the TEAM Asset Strategy Fund, which oversees $200 million in assets.
Spot gold touched a record $1,594.16, and was up 0.4 percent at $1,588.06 an ounce by 12:41 pm EDT (1641 GMT). US gold futures for August delivery gained $3.40 an ounce at $1,588.90. The precious metal is on track for its ninth straight daily rise, its longest run of gains since October 2006. During that period, bullion has risen more than 7 percent.
Silver rose 1 percent to $38.64 an ounce, building on the previous session's near 6 percent rise, its best one-day performance in over two months. The gold:silver ratio - the number of silver ounces needed to buy an ounce of gold - eased to its lowest since late May at around 40.
Gold was weakened along with commodities and other risk assets, after Bernanke reiterated that the Fed would be ready to inject more money into the system should the US economy worsen, but said the time had not come yet and noted inflation had picked up since late 2010.
"This is more about fear, about the dollar, the debt troubles in Europe, as well as the possible downgrade of the US credit rating by Moody's," said Commerzbank analyst Eugen Weinberg. "For gold, this is (one of) the best times." Looking forward, a poll of 15 analysts conducted by Reuters in the past two weeks has returned a median forecast that gold prices will average $1,550 an ounce in 2012. This is about 7 percent higher than the consensus forecast in January at $1,454.
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