In its Gold Price Review, UBS expects the precious metal will average $US2075/oz in 2012, a 50% jump from its previous estimate of $1380/oz for the year.

Analysts also forecast gold to average $1725/oz and $1400/oz in 2013 and 2014 respectively, up from its previous estimates of $1200/oz and $1075/oz.

UBS predicts a long-term gold price of $1100/oz versus $934/oz previously.

"Our core view is that ongoing global macroeconomic disappointments, the inevitability of further negative turns in the European sovereign debt crisis, with low business, consumer and investor confidence will lead to gold being increasingly used as the line of defence against additional negative market outcomes," the report said.

"With the pool of competing asset alternatives sparse, ‘new' money will likely flow into the gold market over the months ahead and into 2012, and this should have significant price implications."

UBS said factors influencing forecasts include direction of the US monetary policy, the lack of other safe haven alternatives in the market, and the potential implementation of a third round of quantitative easing in the United States.

However, UBS also noted key risks to its gold forecasts including vulnerability of gold if there is a repeat of the de-leveraging and de-risking that took place in 2008, a European central bank selling gold reserves, a material improvement in the macro outlook and a solution by policy makers to the European debt crisis.

Gold prices rebounded more than 1% on Thursday following a drop of 3% in the previous session.

At 4:14pm AEST the spot price for gold was trading 1.2% higher at $1839.70/oz.