Just in from the Guardian:Schroders private banking is trimming...

Just in from the Guardian:

Schroders private banking is trimming its position on gold, citing the metal's strong performance over more than a decade and dangers of a squeeze on liquidity, when gold may prove a source of funds. Robert Farago, head of asset allocation at Schroders Private Banking said:

First, the strong performance over the last eleven years means that the price of protection against an extreme outcome is high.

Second, the last six months has seen an increase in correlation between gold and other risk assets. While this is not readily explainable and therefore may be somewhat coincidental, it does reduce the metal's attraction as a portfolio diversifier.

Finally, I am not convinced that a deflationary environment will prove favourable in the short term. This would produce a liquidity squeeze and gold may well prove a source of funds since almost all investors are sitting on profits.

Analysts polled by Reuters expect the price of gold to average $1,750 an ounce in 2012. One of the most bearish is Alexandra Knight at National Australia Bank. She said:

We expect the price of gold to ease as the recovery in the US economy gains momentum and its currency appreciates, shifting demand away from gold and towards currency-based investments and equities.