Gold may test $1250 as 'safety' status fades

Gold prices may fall towards USD 1,250 an ounce this week as a possible resolution to raising the US debt ceiling, staving off default, shores up the dollar and undermines the precious metal`s safe-haven status, according to CNBC`s latest market survey of traders, analysts and strategists.

CNBC`s latest poll of gold market sentiment showed 83 percent (15 out of 18 respondents) expect prices will fall this week, 11 percent (2 out of 18) predict price gains, while a single respondent sees prices trading around current levels.

Many, however, called gold`s status as a safe harbor into question as the asset failed to attract buyers even when the dollar weakened and the US shutdown dragged on.

Bullion on Friday hit USD 1,242.10 at one point during the session, its lowest level since July 10.

"Gold is being taken out to the woodshed yet again today and we can expect to see continued weakness if the debt ceiling and government shutdown are resolved," said Kevin Kerr, President and CEO of Kerr Trading International on Friday.

"Gold has really failed in terms of performance as a flight to quality vehicle."

Sub-USD 1,300 gold "technically is extremely weak and a test of USD 1,200 is likely should this trend continue," Kerr added.

- CNBC`s Sri Jegarajah. Follow him on Twitter @cnbcsri

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