Gold backs off record high

NEW YORK (CNNMoney.com) -- Gold prices retreated from a record high Thursday as investors took a slightly less pessimistic view of the European economy.

June gold was down $13.09, or 1.1%, to settle at $1,229.20 an ounce after ending the previous session at a record closing price.

Gold surged near an all-time high of $1,250 an ounce in active trading Wednesday as investors flocked to the metal for safety. But analysts said the rally may have been overdone, suggesting the market is due for a correction.

"When you get a fit of buying like that it often signifies a top in the market," said Joe Foster, a portfolio manager with Van Eck International Investors Gold Fund.

Gold prices had been supported by fears that the fiscal meltdown in Greece could spread to other struggling European economies and threaten the stability of the European Union.

In response, European leaders unveiled a bailout package worth nearly $1 trillion earlier this week and announced that the European Central Bank will begin buying government and corporate bonds.

The goal is to stabilize markets and buy time for troubled European economies such as Greece, Spain and Portugal to restructure unsustainable debt loads.

"The contagion has been contained at the moment," said Jon Nadler, senior analyst at Kitco Bullion Dealers in Montreal. "What remains to be seen, is if the measures policymakers are trying to put in place will work."

Many analysts expect gold prices to fall back near $800 an ounce over the next ten or 12 months, according to Nadler.

He said the economic fundamentals for gold are "completely upside down." Demand from jewelry fabricators has been weak, and much of gold's recent strength has been speculative in nature, he said.