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LONDON (Reuters) - A record high gold price above $2,000 an ounce next year could mark the peak of the precious metal's more-than-decade-long bull run as monetary policy in key economies starts to normalize, the chairman of metals consultancy GFMS said on Wednesday.
The market is expected to rise to new highs by early 2013 after struggling this year against a backdrop of softer demand in key physical markets and slackening investment appetite for bullion, GFMS chairman Philip Klapwijk told Reuters.
Gold prices are likely to be driven above $2,000 as concerns over the euro zone debt crisis persist and the prospect of more U.S. monetary easing gains ground, he said.
But that move could be short lived as those factors dissipate, particularly if the prospect of higher U.S. interest rates becomes a reality the following year, he said
"We are expecting still that we are going to see a push above $2,000 in 2013, but it may be that 2013 marks the high water mark for the market," Klapwijk said.
"It depends (on whether) we see some resolution in Europe, enough to really take some of the sting out of that issue... an end to stimulus measures in the United States... and the prospect of a normalization of monetary policy."
Klapwijk said gold was expected to trade in a range of $1,530-1,920 an ounce in 2012, with an average price of $1,731 an ounce. The upper end of that price view is just below last year's record $1,920.30 an ounce, reached in September.
"What we're seeing... is a postponement of the next leg higher in prices," Klapwijk said before the launch of GFMS' Gold 2012 report. "The $2,000 an ounce level being surpassed is probably looking more like a story for the first half of 2013 than something we will see in the second half of this year."
"Lying behind this is what we have seen over the first three months of this year, which is a certain amount of investor fatigue, (and) certain physical markets such as India and China not punching quite as hard as they did last year," he added.
Looking at projections for supply and demand this year, he pointed to a fundamental surplus in the market which in dollar terms could be north of $130 billion.
"That surplus needs to be purchased by central banks or, more likely, private sector investors. This is quite a big ask now."
Some key areas of demand, such as central bank buying, will remain in place, but the company said it does not expect official sector purchases, which last year rose to their highest since the mid 1960s, to increase much this year in ounce terms.
A softer picture has emerged of jewelry buying, the largest single element of gold demand. Gold jewelry fabrication fell 2 percent in 2011 to 1,973 metric tonnes (2,175 tons), GFMS data showed, as off take from major consumer India fell nearly 3 percent to 761 tonnes.
Physical bar investment has since softened a touch after leaping by some 37 percent to a record 1,209 tonnes in 2011.
"There isn't the same panic move into physical bars that we saw at times last year," Klapwijk said. "That isn't to say demand for physical bars and coins isn't at what are still pretty high levels historically, but we are seeing less strength than in the fourth quarter."
"Generally investors are almost looking for the next big reason to make a more powerful move into gold."
The gap between the amount of gold mined and recycled, and the quantity used to fabricate jewelry and other goods, is expected to widen this year, Klapwijk said.
"That number has gone up substantially over recent years, in terms of the call on the market and the amount that needs to be committed to the market to clear this surplus," he said.
"This is going to at some point become unsustainable. Unless you believe there is going to be a massive sea change in terms of those investors that are involved in this market and a massive broadening of participation, there will come a point where the usual suspects won't be enough to buy all this gold, and the price is going to fall."
Gold's correlation with other assets such as stocks, the dollar and the euro is still in a state of flux.
In the first three quarters of 2011 gold traded largely in line with the dollar as investors bought both assets as a haven from risk. But in the last six months it has traded against the dollar and in line with other commodities.
While it is currently less vulnerable to fluctuations in the equity markets, Klapwijk said, prices could still drop sharply if a sudden move lower in stocks is seen.
"I personally think investors, looking at the more speculative end of the spectrum, are probably not as leveraged as they were at the end of the third quarter, and therefore the vulnerability of gold to sell off when the market is in risk-off mode is not as great as it was at times last year," he said.
"But if we're looking at a $1,530 low for gold, that does build in an expectation that there is going to be a risk-off moment and that gold will probably be sucked under for a while."
GFMS is a Thomson Reuters company.
Reporting by Jan Harvey; editing by Jason Neely