The brokerage said another episode of extreme risk aversion in the short term could potentially see gold correct further from its current level, as its sales offset losses in other asset classes.
Analyst Anne-Laure Tremblay, however, expects bullion to continue trend higher until 2013.
“We see the gold price peaking in 2013, as the market starts to anticipate monetary tightening in the US, but do not expect a sharp fall thereafter,” analyst Tremblay said in a note.
The brokerage now expects gold prices to average $1,730 an ounce in the fourth quarter, down from its earlier forecast of $2,170 an ounce. Its 2011 forecast is down to $1,580 an ounce from $1,635.
BNP also cut its 2012 price forecast to $1,950 per ounce from $2,080, while lowering its 2013 estimate to $2,125 an ounce from $2,200 an ounce.
Gold fell Thursday, hitting a stiff headwind from a stronger dollar, after US data signaled a slight improvement in the jobs market, although investor nerves over the euro zone were ultimately expected to support the bullion price.
China’s trade surplus narrowed for a second month in a row in September, driven by a contraction in imports and exports that reflected the slowing global economy and also a softer domestic market, which put pressure on industrial commodities.
In Europe, Italy’s sale of 6.2 billion euros in bonds eased investors’ immediate concerns about its funding in the euro zone debt crisis, but a poll showed the chances for recession within the single currency bloc are rising.
Gold has risen by more than 2 percent this week, due to robust demand from jewelers and other consumers in Asia, where premiums are at their highest since the start of the year, and to demand from investors seeking an alternative to equities and currencies as the euro zone debt crisis deteriorates.
The spot gold price was last down 1.0 percent on the day at $1,660.49 an ounce by 1350 GMT, having come off an overnight high at $1,683.89, but was still set for a 1.4 percent gain this week, its strongest weekly performance in over a month.
“The key here for gold is investors in ‘paper gold’ will stay away from the market, because they got burned because of having to put their money elsewhere to cover margin calls and the credibility of the euro is undermined, so they’re going back into the dollar,” said VTB Capital analyst Andrey Kruychenkov.
“As far physical demand is concerned, it is supported ... gold joined the broader rally over the last week because people thought euro zone doesn’t have many options. They will have to bail out, they will have to recapitalize banks, they will have to boost the European Financial Stability Fund, but it’s enough fooling around. In a sense, people are frustrated that (euro zone leaders) don’t have the coherent plan yet that they promised,” he added.
Gold’s major hurdle came in the form of a rally in the dollar after new US claims for jobless benefits were little changed last week and the trade deficit narrowed marginally in August, indicating a modest improvement in the economy.
Initial claims for state unemployment benefits dipped 1,000 to a seasonally adjusted 404,000, the Labor Department said on Thursday. Economists had expected claims to rise to 405,000.
A separate report from the Commerce Department showed the trade deficit fell to $45.61 billion in August from $45.63 billion the prior month. Economists had expected the trade gap to widen to $45.8 billion.
A rising dollar tends to hamper gold, which usually declines at times of dollar strength as it raises the cost of owning the metal to non-US investors.
The euro fell broadly, pulling back from a one-month high versus the dollar after the European Central Bank warned about the impact on the currency and the region’s banks of involving private sector bondholders in euro zone bailouts.
There is a growing chance the euro zone economy will slip back into recession as fears rise that the debt crisis will escalate, financial markets slump further and a global slowdown knock growth, a Reuters poll predicted on Thursday.
The poll of 70 economists taken in the past week gave a median 40 percent chance of a return to recession, up from a 30 percent chance given in a poll taken just a month earlier and a mere one-in-five in August.
Industrial commodities came under pressure after the Chinese trade figures, with crude oil falling 0.5 percent to $110.82 a barrel, while copper lost 1.4 percent.
China’s trade surplus of $14.5 billion in September was smaller than August’s $17.8 billion and less than half of the $31.5 billion recorded in July. Exports to the troubled European Union fell to their lowest value since June.
In the US, the minutes from the Federal Reserve’s last meeting in September showed the Federal Open Market Committee discussed the possibility of launching a fresh round of bond purchases before deciding last month on a more limited step to aid the economy.
“The FOMC’s Sept 20-21 meeting minutes yesterday were moderately gold-friendly. They revealed that all options are open and some officials wanted to keep additional asset purchases as an option to boost the economy, with the discussion mostly focusing on long-term Treasuries,” said UBS strategist Edel Tully in a note.
“The Fed sounded concerned about economic growth, noting that additional accommodation would be needed if improvements in employment were too slow.”
An environment of near-zero US interest rates is generally favorable for gold, which as a non-yield bearing asset, tends to gain favor with investors who forfeit less of a premium for holding bullion rather than stocks or bonds.
In other precious metals, silver fell by 2.8 percent to $31.65 an ounce, declining in tandem with the base metal complex, while palladium, of which China is a key consumer in the auto industry, fell 1.2 percent to $597.47
Palladium, which virtually doubled in price last year due to demand from China’s fast-growing car market, has lost more than a quarter of its value this year, having fallen to its lowest in 25 months this month.
Platinum eased 1.3 percent to $1,523.75.
