Investors have accumulated the largest-ever gold hoard this week as Europe's deteriorating debt crisis has prompted investors to flock to safe havens.
Holdings in exchange traded products backed by gold reached a record 2,350.8 metric tonnes on Wednesday, valued at $127.4bn, according to Bloomberg data.
The data also showed investors are expecting the price of gold to rally next week.
Hedge funds and other speculators increased their net-long position by four weeks, the longest stretch since March, according to the Commodity Futures Trading Commission.
Analysts have said the appeal of gold is increasing as other safe havens become less attractive.
Yields on seven year US treasuries fell to a record low of 1.415% on Wednesday, while a German bund auction suffered a lack of demand this week, as the €6bn auction only attracted a bid-to-cover level of 1.07.
Bullion rose 19% to $1,685.50 an ounce this year on the Comex exchange in New York, and reached a record $1,923.70 in September.
Investors added 79.5 tons of gold to their ETP holdings since the start of November, on track for the best month since July, the Bloomberg data showed.
The combined tonnage is greater than the reserves of all but four of the world's central banks and equal to more than 10 months of global mine supply.
Conversely, Standard Bank economists are expecting gold to fall back to $1,600 per ounce as emerging market currencies, particularly India, weaken and funding stress increases in Europe, adding such a fall would be a buying opportunity.
"Physical demand is much weaker than it was six weeks ago. Much of the demand weakness is from India where the rupee has depreciated by more than 7% since the start of November," said the report.
"This has pushed gold denominated in rupees to all-time highs this month. Even now, with gold coming off in dollar-terms, gold denominated in rupees is still very close to its all-time highs."
However, the bank expected demand to be restored one the price of gold drops to $1,600.
According to the bank, funding stress for European banks also remains high.
"We continue to believe that the dominant fundamental driver of gold is global liquidity, followed by real interest rates. Funding stress puts pressure on liquidity and thereby, gold too. Funding stress also raises real interest rates. If this stress becomes to acute, gold (and all other commodities for that matter, will come under extreme downward pressure)," said the research.
"However, we believe that major central banks would try to prevent a money market breakdown akin to 2008. We also believe that this assistance would prevent gold from collapsing. As a result, we would see a price dip towards $1,600 as a buying opportunity."
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