The chief executive of precious metals research firm GFMS said on Monday he expects gold to rise "significantly" in the short term, largely on investment demand, but the price will start falling back in the long term. "We are bullish for significant price gains in the short term," London-based GFMS CEO Paul Walker told Africa's biggest mining conference in Cape Town, without giving a specific price. Gold consultancy GFMS has previously said it expects gold to trade as high as $1,080 an ounce in 2009. Spot gold slipped to $902.85/904.85 an ounce at 1303 GMT, down from $911.70 late in New York on Friday. Earlier it touched a low of $900.35. "If you take any of the mainstream currencies, even the Swiss franc, we see gold being favoured by investors," he said. "Hence we see a shift into gold and we expect sustained higher dollar prices of gold in 2009, 2010. Gold has been performing extremely well while the rest of the rest of the metals basket has been hammered," he said. Walker said the gold run would however be nipped in the bud in the long term. "For the last few years, for every ounce of gold mined, there hasn't been enough physical demand to take that product, and what has been pushing gold higher is investment, this won't be the case in perpetuity," he said. "Over a five to ten year time frame there will have to be a correction at some time. People will then wait back on expenditure to wait for prices to fall, and we shall see substantially lower prices." Walker said mine supply fell modestly in 2008, and is expected to be up slightly in 2009. "Our view of what drives gold in 2009 and 2010 will have very little to do with supply, barring any major shocks in supply," he added. SPDR Gold Trust, the world's largest bullion-backed exchange traded fund, said its holdings were static on Friday after rising to a record on two successive days last week. On the demand side, jewellery has underperformed expectations, while de-hedging has picked up pace but the key driver in the gold sector has been investment, Walker said. Jewellery demand was hit last year by higher prices, with big dollar rises damaging demand in India. Walker said he expects lower jewellery demand in 2009. "The value of investments, the willingness of people to dig their hands into their pockets and put cash on the table to pay for gold has gone up, and will go up," he said. "We are extremely pessimistic about the world economy in 2009, 2010 and in this economic climate the desire for wealth preservation will hold sway," he said. Gold dipped 1 percent on Monday as hopes the Obama administration's stimulus plan will boost U.S. growth took the heat out of safe-haven buying, with a firmer dollar spurring profit-taking after recent near 4-month highs. However, the metal climbed from lows as disappointment at a delay in announcing a U.S. bank bailout plan sent some cash back into assets perceived as safe, such as gold.

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