Gold is poised to complete its 11th consecutive annual gain, the longest winning streak in at least nine decades, on the brink of a bear market.
George Soros, the billionaire who two years ago called it the "ultimate asset bubble," cut 99 per cent of his holdings in the first quarter, Securities and Exchange Commission data show.
Hedge fund managers John Paulson, Paul Touradji and Eric Mindich also sold bullion this year.
While speculators in New York futures are the least bullish in 31 months, the median estimate in a Bloomberg survey of 44 traders and analysts is for prices to rally as much as 40 per cent to $2,140 an ounce in 2012.
Article continues below
The divergence of views is widening after prices declined 19 per cent from a record close of $1,900.23 on September 5, or one percentage point away from a bear market.
As some investors retreated to cash amid a $10 trillion slump in global equity values since May, others bought more metal, taking holdings in exchange-traded products to an all-time high two weeks ago.
Bullion's 7.8 per cent gain in 2011 means it's on track to beat stocks, bonds and the dollar for a second straight year.
"It's done its job this year of protecting investors," said Michael Cuggino, who helps manage about $15 billion of assets, including $3 billion in gold, at Permanent Portfolio Funds in San Francisco and correctly predicted in February that prices would keep rising.
"Gold has been all over the place. If you bought gold at $1,800 then you aren't too happy. Some people will get out of gold, but the longer-term investors will remain."
Bullion was at $1,531 at 11:17am in London, below this year's average of $1,572.47 and six times more than when the bull market began in 2001.
The MSCI All-Country World Index of equities declined 11 per cent, on track for the worst year since 2008, and the Dollar Index, a measure against six major trading partners, advanced 2.1 per cent.
Fixed-income securities around the world gained 4.3 per cent this year, the weakest performance since 2007, Bank of America Corp. indexes show.
Investment in physical metal is cooling. The US Mint's sales of American Eagle gold coins in Nov-ember were the weakest since June 2008, data on its web site show. Holdings in bullion-backed ETPs fell about 35 metric tonnes since reaching a record on December 14, according to data compiled by Bloomberg.