LONDON (Reuters) - Investors banking on a third round of U.S. money-printing to push gold back to record highs this year are taking a risk, not least because the metal's other pillars of support look shaky.
Quantitative easing (QE) - boosting the economy by printing money to buy bonds - could in theory encourage bullion buying by increasing liquidity while anchoring low long-term interest rates and by arousing concerns over longer-term inflation. These are factors that have supported gold in the past.
Nearly 60 percent of respondents to a Reuters poll in July predicted the metal would exceed its current quarterly record price in the last three months of this year, with QE overwhelmingly flagged as the catalyst.
QE's arrival is not certain, however. Economists surveyed by Reuters this month put the odds at about three in five. Even if it does materialise, its impact on gold may be muted.
"We're of the view that we're getting close to game over for gold," RBS analyst Nikos Kavalis said. "From there (a QE related rally) onwards, I am struggling to see where the kind of volumes of investment that we got in 2009 and 2010 are going to come from."
"A lot of investors are reluctant to expand positions... (they) are already very, very long. What you need for a recovery is a change of sentiment from the professional investment community which, let's face it, isn't going to last forever."
The price of gold is up just 3 percent in 2012 so far at around $1,612 an ounce, on track for its worst yearly performance in more than a decade, following a record-breaking 11-year bull run.
Since late 2008, the Fed has bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades.
In the course of the first round of quantitative easing, which ran from November 2008 to March 2010, gold prices rallied by a third. During QE2, between November 2010 and March 2011, they rose by another 17 percent.
Analysts are not convinced that gold has the ability this time to significantly extend those gains.
"What's the upside to gold with more QE? Maybe $1,800 - certainly not new highs," Societe Generale analyst Robin Bhar said. "You have got some disillusionment setting in."
The liquidity injections that followed the financial crisis were only one of the factors driving gold higher. But the environment for gold has changed substantially.
The European debt crisis, one of the key factors that pushed gold prices to record highs last year as investors sought shelter from volatility in the currency markets, has now turned into a negative factor for gold due to its impact on the euro.
Mining companies have long finished buying back forward sales of gold originally made to lock in future prices, a process known as de-hedging which became widespread a decade ago when it became apparent that gold had much further to rally.
Bullion is a heavily sentiment-driven asset, and the speculative investors who lifted prices to a record $1,920.30 an ounce last September would probably have been less willing to do so without perceptions of strong underlying demand.
"Gold did rise a lot in the boom years, not just based on QE. In those days there was de-hedging, there was a shift from central bank sales to purchases, there was an increase in Chinese physical demand and a recovery in Indian demand," Mitsubishi analyst Matthew Turner said.
"De-hedging is no longer an issue. Central bank purchases are continuing, but it's not a question of continuing, they have to increase. Indian demand has been hit by high prices and government action, Chinese demand is quite strong, but it has limits. Investment demand is probably the real bullish case."
Indian consumers have been reluctant to buy the metal at the kind of prices Western investors pushed it to last year - a worrying trend for the market, given that India accounted for some 28 percent of global fabrication demand last year.
Meanwhile red-hot buying in China, which has emerged as a challenger to number one consumer India in recent years, has also cooled.
"In 2011, a lot of people participated in the trading of Shanghai gold T+D (a forward contract), and bought shares in companies in the gold industry," Chen Min, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen, said.
"This year the overall market has weakened. There has been less interest in such investment, as well as in purchases of physical gold."
Inflows into gold-backed exchange-traded funds - popular vehicles for investment that issue securities backed by metal - have lost momentum this year, with holdings of the world's largest, the SPDR Gold Trust, stagnant in the first half.
ETF investment has recovered a bit and there has been little selling from the funds. But the ability of these products to generate high volumes of fresh demand - the SPDR alone absorbed 500 tonnes of gold between the 2008 collapse of Lehman Brothers and the end of last year - will be missed.
The extreme strength of overall investment flows into gold, whether into ETFs, or more traditional coins and bars, will be tough to replicate.
"You do need to have fresh money coming in day in, day out," GFMS research director Philip Newman said. "You need to have continual inflows, not just one or two institutional players such as pension funds to make that decision to come in."
Confidence in gold's ability to go up and up has been shaken by its poor performance this year, despite the still elevated levels of risk aversion that last year drove it higher.
A third of the analysts polled in July who responded when asked confidentially this week whether they would revisit their forecasts said their price view would now be lower, with most others saying they would leave it unchanged.
The metal is certainly far from down and out. By historic standards, prices are still very high, and are likely to remain so while today's ultra-low interest rate environment persists, reducing the opportunity cost of gold, meaning the loss of earnings that might have been made from reaping interest.
Gold could benefit if the U.S. 'fiscal cliff' approaching in the winter, as spending cuts coincide with tax hikes, results in the kind of political brinksmanship seen during negotiations on a debt ceiling that sparked a gold price rally late in 2011.
And if it arrives, a third round of QE would probably spark another rally - but it is one some analysts are already dubbing gold's last hurrah.
(Reporting by Jan Harvey; Additional reporting by Rujun Shen in Singapore; Editing by Anthony Barker)