Gold correction "healthy" amid "commods bubble"

Mary Miller, director of the Fixed Income Division and vice-president of T. Rowe Price Group, speaks at the Reuters Investment Outlook Summit in New York, December 7, 2009.

NEW YORK (Reuters) - Gold's break from record highs is a healthy correction for a market up nearly 20 percent over the last two months and signaling a bubble in commodities, speakers at the Reuters Investment Outlook Summit said on Monday.

Bullion, as well as U.S. futures in gold, traded below $1,140 an ounce Monday, after scaling $1,200 from 13 record high sessions since the start of November.

"I think any time that you see an uptrend like that, it makes sense for the market to come back down," said Mary Miller, head of fixed income trading for T. Rowe Price.

Gold prices fell about 5 percent on Friday, the biggest single-day loss since October 2008, after the dollar surged on better-than-expected U.S. jobs data that raised the potential for an eventual hike in U.S. interest rates from current ultra-low levels.

The rally in gold this year has been largely driven by investors viewing the precious metal and other commodities as a store of value against the depreciating dollar, which has fallen to 15-month lows against currencies like the euro.

The dollar .DXY had risen early Monday, extending the sell-off in gold, but fell later. Benchmark gold futures in New York managed to recover, but rose only as high as $1,166.20 an ounce -- about $61 below the record high hit on Thursday.

Miller said although she understood gold's inverse relationship with the dollar, she still found the precious metal's year-to-date gain of 30 percent "surprising."

"So what you got on Friday was probably a healthy correction," she told the investment summit.

Veteran Wall Street economist Henry Kaufman said he thought commodity prices had been overblown by a froth of speculation that has returned to financial markets since the worst of the recession.

"There are bubbles in commodities," and probably in the gold market as well, Kaufman, president of financial consulting firm Henry Kaufman & Co Inc in New York, said, identifying the return of leveraged bets as one driver.

Martin D. Sass, chairman and chief executive of New York fund M.D. Sass, concurred.

"There's lot of risk out there and asset bubbles have formed again and gold is showing some of those tendencies," Sass said.

Kaufman, who was dubbed "Dr. Doom" for correctly forecasting higher inflation and interest rates during the 1970s and 1980s, said pressure on the dollar could ease once private sector credit demand recovers.

(Editing by Leslie Adler)