Sell gold, says Goldman Sachs

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Goldman Sachs Group Inc., the world’s biggest securities firm by market value, advised investors to sell gold on expectations turmoil in financial markets will ease and a slump in the dollar will slow.

Gold may decline 15-20% next year, Goldman chief economist Jim O’Neill said by phone from London on Thursday.

The recommendation contrasts with a forecast published two days ago by New York-based Goldman analyst Oscar Cabrera, who predicted the average price of gold in 2008 will rise to $800 an ounce, from about $687 this year. ‘’We see upside risks to our forecast,’’ Cabrera wrote in a research report.

Gold rose to within 0.5% of an all-time high of $850 an ounce on November 7 as record crude-oil prices spurred demand for the metal as a hedge against inflation and traders sought an alternative investment to the slumping dollar. The US currency has declined 10.5% against the euro this year.

Gold for immediate delivery climbed $1.95, or 0.2%, to $806.78 an ounce as of 9:44 a.m. in London.

Investors who sell gold will ‘’benefit from the prospect of a stabilization in the US dollar,’’ O’Neill wrote in a report yesterday titled ‘’Introducing Our 2008 Top 10 Trades.’’

‘’We see scope for acceleration through $770 to re-test the $600-650 levels prevailing ahead of the summer,’’ the note said.

O’Neill said on Thursday his economics group made its forecast as part of an annual review of top investments.

‘’We think gold’s gone a long, long way and we think it’s due for a 15-20% move down,’’ he said in an interview.