HSBC and Barclays both cut their 2012 gold price targets by over $100 an ounce after the metal posted a gain of 10 percent last year to extend its run to an 11th consecutive year. It was, however, its smallest annual gain in three years.
HSBC's chief commodity analyst James Steel slashed his 2012 forecast to $1,850 an ounce from his previous target of $2,025, citing a weak euro, liquidation related to equities' losses and lackluster physical demand from emerging markets.
Steel also kept its 2012 silver view unchanged at $34 an ounce but he cut his price forecasts for platinum and palladium.
Bullion has appeared to lose its investment appeal as a safe haven after moving in almost virtual lockstep with the euro and equities in the last two months.
The precious metal has failed to rally in December even as bond yields in the euro zone's third largest economy Italy soared to unsustainable levels.
Last week, gold was briefly 20 percent below its record September high of $1,920.30 an ounce, the common definition of a bear market. It had lost as much as 11 percent in December on year-end liquidation by hedge funds.
Gold rose around 1 percent on Thursday for a fifth straight day of gains. It has now more than recouped all of the losses in the last week of 2011.
J.P. Morgan Chase, a major bullion bank, said in August that gold could eventually hit a record $2,500 an ounce, while Morgan Stanley and Societe Generale analysts are also expecting gold to rise to well above $2,000 an ounce.
Banks and brokerages tend to have a bullish bias to their gold forecasts as most of their fund and institutional clients are betting on gold's upside amid inflation worries and economic uncertainties.
Barclays said it expects gold prices to average $1,875 an ounce in 2012 as it battles a host of factors including soft physical demand, a strong dollar and technical selling. In November 2011, the bank had a forecast of $2,000.
Barclays' precious metals analyst Suki Cooper said that gold in the longer term should still rally to a new record at above $2,000 an ounce.
"Gold still possesses structural pillars of support in an environment of negative real interest rates and rising inflationary pressures, as well as continued central bank buying," Cooper said.
Barclays also cut its average 2012 silver forecast to $32.5 an ounce from $35 an ounce, while also lowering platinum and palladium targets for the year.
