(Kitco News) -- Gold prices were probably due for some type of profit-taking pullback, but the longer-trend uptrend remains intact, analyst say.

Around mid-week, gold was poised to break through to record highs.

On the Comex division of the New York Exchange, the December contract on Wednesday hit a peak of high of $1,264.70 an ounce. This brought it within striking distance of the $1,266.50 record for any most-active contract, which was hit by the August futures back on June 21. Spot gold also came close to its record listed by one price vendor at $1,265.30.

But December gold fell on Thursday and then dipped some more Friday to a low
of $1,237.90, before bouncing again. At 2:30 p.m. EDT (1830 GMT), the December futures were down $5 for the day at $1,246 an ounce.

“I think it is perhaps some profit-taking and technical selling,” said Carlos Sanchez, director of risk management with CPM Group.

Technically, some selling set in when the market was not able to forcibly break above $1,260, technicians said. Often, futures traders might exit some positions to capture short-term gains whenever they sense momentum might be abating around chart resistance.

“There is a substantial history of previous highs acting as pivots or oscillation points,” said a research note from Barclays Capital. The bank said “we remain bigger-picture bullish on gold” but suggested the precious metal had to correct lower by “a touch” first.

Barclays pointed out that the number of Comex open futures positions is approaching 600,000 contracts. Also, last week’s data from the Commodity Futures Trading Commission shows that large speculators have some 273,000 long futures positions, approaching bullish extremes in the 279,000-283,000 area.

“Combined, these signals point to extreme bullish sentiment, particularly amongst the hedge-fund community, suggesting that price might struggle around $1,265 as profit-taking ensues,” Barclays said.

Meanwhile, Sanchez said, fabrication demand tends to abate some as prices hit historical highs. But conversely, he said, demand tends to re-emerge once there is a pullback, as happened earlier this summer.

Ultimately, any pullbacks in gold are likely to be temporary, with gold eventually extending its record highs, analysts said.

In fact, it’s even possible gold has already put in its low for the recent correction, said Ira Epstsein, director of the Ira Epstein division of the Linn Group. The December futures held not far below the 18-day moving average of closes, which was around $1,241 going into Friday’s session, he said.

 “If the market takes out the $1,260 level, I think we’re off to the races,” Epstein said. “I’m still looking for $1,300 by year-end.”

Sanchez also looks for $1,300 yet this year, if not higher. Once any correction is completed, Barclays foresees a move toward $1,350 by year-end.

“You still have a broad array of fundamentals to support strong investment demand,” Sanchez said.

Worries about economic conditions and the strength of financial markets persist, Sanchez said. Some support also may come from “stressful political conditions,” with mid-term congressional elections this fall in the U.S. Also, investors remain wary of sovereign debt and budget deficits in the U.S. and Europe.

Meanwhile, the calendar is also at the start of a seasonally strong period for gold, Epstein pointed out. Physical buying tends to occur due to a number of gift-giving holidays in India in the autumn, then the Christmas season in Western nations. More support could come from currency movements and uncertainty about the economy as investors grapple with whether there will be a double-dip recession in the U.S.

Epstein also expressed doubt that employment will increase significantly and suggested the business climate could weaken further during the remainder of the year.

By Allen Sykora of Kitco News; asykora@kitco.com

Editor’s Note: Meet the Kitco News Team at the upcoming Kitco Metals eConference September 12-13, 2010. A not-to-be missed event featuring Ron Paul, Marc Faber and other industry heavyweights. The eConference is free with Pre- Registration www.kitcoeconf.com.