Goldman Sachs analysts believe gold's unexpected rally this year will soon fade despite renewed enthusiasm among the hedge fund community.
Hedge funds and other speculators expanded bets on higher prices for a fourth week in New York futures and are now the most bullish since December 2012, US government data showed late last week.
The net-long position in gold climbed 3.8% to 118,241 futures and options in the week ended 4 March, US Commodity Futures Trading Commission (CFTC) data showed.
Short holdings were down 15% to 26,321, the lowest since October. Net-bullish holdings across 18 US-traded commodities rose 9.7% to 1.59 million contracts, the most since the data begins in June 2006.
However, while gold has logged its best start in six years after topping $1,350 an ounce, Goldman's Jeffrey Currie said the odds were increasing that prices would drop to $1,000 for the first time since 2009.
The turmoil in Ukraine does not alter Goldman's bearish view on gold, and the recent weakness in the US economy is probably weather driven, not "real deterioration," said Currie, the bank's head of commodities research.
Lower mining costs mean it was more probable than it was six months ago, that prices would drop below $1,000, Currie told Bloomberg.
"The gains have been impressive," said Chad Morganlander, a fund manager with Stifel Nicolaus, which oversees assets worth about $150bn. "There's been a perfect storm of geopolitical uncertainty as well as growth scares here in the US."
"Some kind of middle-ground solution in Ukraine is probably the case at some point," said Rob Haworth, a Seattle-based senior investment strategist at U.S. Bank Wealth Management, which manages $115bn.
"For the two big commodities, oil and gold, we've probably seen relative highs for the next month. Once this geopolitical risk premium ebbs, I don't see a lot of fundamental speculative support to push gold a lot higher," Haworth told the news agency.
US gold futures for delivery in April gained 1.26% for the week ended 7 March.
American employers added 175,000 jobs in February after creating 129,000 new positions in January. The unemployment rate, however, rose to 6.7% from a five-year low of 6.6%, government data showed.
Economists polled by Reuters had expected non-farm payrolls to increase by 149,000 and the unemployment rate to remain steady at 6.6%.
The US service sector, which account for almost 90% of the economy, grew at the slowest pace in four years in February, data from the Institute for Supply Management showed on 5 March.
The China Gold Association has said that the demand in the nation, the world's leading consumer of the yellow metal, is poised to drop to 250 metric tons this quarter, down 17% from a year ago.
Billionaire hedge-fund manager John Paulson, who holds the biggest stake in SPDR Gold Trust, reported gains in his firm's main strategies last month partly as bets on gold paid off.
Holdings through gold ETPs rose in February for the first time since 2012. Assets in the SPDR Gold Trust, the biggest such fund, are up 0.9% in 2014 following a 41% drop in 2013 that wiped $41.8bn in value.
Bullion has gained some 11% this year amid indications of weakening US economic growth and the ongoing standoff between Russia and the Ukraine.