POLL-Gold to squeeze out fresh gains in 2010, flatten in 2011

* Gold prices projected to be 13 pct higher in 2010 vs 2009 * Bullion price to flatten in 2011; dollar recovery eyed * Silver to rise 24 pct in 2010 vs 2009

* here

By Jan Harvey

LONDON, Jan 27 (Reuters) - A low global interest rate environment and concern about inflation should see gold prices gain further traction this year after a stellar 2009 and temper the dollar's recent gains, a Reuters poll showed.

The median forecast from a poll of 60 analysts conducted in January suggests gold will average $1,150.50 an ounce this year, 13 percent above 2009's median price, according to Reuters data, of $1,014, and marking a tenth successive year of gains.

While 2010's forecasts are bullish, the average from the poll is well below the precious metal's record high of $1,226.10 an ounce set in December 2009 -- a year in which gold posted 25 percent gains. Prices are expected to remain flat in 2011.

Analysts, fund managers and traders polled said longer-term U.S. dollar strength and leading economies moving to tighten monetary policy as they emerge from fiscal stimulus needed to address the economic slowdown could weigh on gold.

Another factor that could influence prices is regulation, in light of proposals for sweeping restrictions on U.S. banks that could squeeze liquidity into commodities and crimp demand from investors. [ID:nLDE60L0F0] [ID:nTOE60K011]

"The main drivers of precious metals over the next two years will be the state of the global economy, the amount of government spending, and whether credit conditions remain loose," said Tom Pawlicki, an analyst at MF Global in New York.

"Under current conditions, precious metals have benefited from accommodative monetary policy and excessive government deficit spending across the globe," he said.

"Metals have become a safety play to guard against future inflation emanating from these policies."

The poll shows that the metal is expected to peak in the second quarter of 2010, and to hold the bulk of its gains for the remainder of the year and into 2011.

According to the median forecasts given, gold will average $1,150 in the first quarter of the year, rising to $1,200 in the second, before easing back to $1,185 in the third and $1,175 in the last three months of the year.

In 2011 prices are expected to be virtually unchanged, with the median forecast for that year coming in fractionally below this year's figure at $1,150.00 an ounce.

Spot gold prices XAU= were bid at $1,096.65 an ounce around midday in London.

INTEREST RATES DICTATE

The outlook for U.S. interest rates is seen as vital for the dollar's trajectory, inflation and, by extension, gold.

Any tightening of U.S. monetary policy, raising current borrowing costs from 0-0.25 percent <INT/RATE>, would boost the dollar's appeal and dent that of gold, which, as a non-interest bearing asset, tends to lose its allure when rates rise.

Several gold market analysts were sanguine on the outlook for U.S. borrowing costs, citing the shaky nature of economic recovery.

"In our opinion, rising market expectations of higher short-term interest rates in both the U.S. and Europe are likely to prove unfounded for much of 2010," said Mitsubishi Corp precious metals strategist Tom Kendall in London.

"Economic recovery in the West remains fragile, and we do not expect either the Federal Reserve or the European Central Bank to push borrowing costs up before September at the very earliest," he added.

"With real interest rates likely to stay negative, the environment for gold investment should remain constructive."

Further gold purchases by central banks, after hefty buying by both India and China in recent years, could also lend significant support to prices, if it materialises.

SILVER

Meanwhile, silver prices are expected to rise 24 percent this year from last, as a firmer economic outlook should act as a support to metals that are primarily industrial in use. The bulk of silver is used in industries like electronics manufacturing.

Silver was expected to trade at an average $18.50 an ounce in 2010, the median forecast from the poll showed, up from 2009's median price of $14.87 an ounce.

But the poll suggested it would struggle to maintain those gains, with the median price forecast for 2011 slipping to $18.14 an ounce.

"The silver market should benefit from increasing industrial demand and good economic indicators are likely to spur prices," said Stuttgart-based Landesbank Baden-Wuerttemberg analyst Thorsten Proettel.

"The price increase could decelerate a little bit as the real conditions may underachieve the prospects of the economic recovery."

Spot silver XAG= was bid at $16.72 an ounce around midday in London.

For more grahics of price forecasts, click on:

here

here

For table of price forecasts, click on COMMODITYPOLL01

For selection of analysts' views on precious metals, click on [ID:LDE60O1WH]

For story on outlook for platinum and palladium, click on [ID:nLDE60O1WD]

(Reporting by Jan Harvey; Additional reporting by Veronica Brown in London, Frank Tang in New York, Ruchira Singh in New Delhi, Chikako Mogi in Tokyo; Editing by Amanda Cooper)