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By Fiona Ortiz

LIMA, Peru, May 6 (Reuters) - Analysts at a gold conference in Peru disagreed strongly on Thursday over where the price of gold was headed, with one expert predicting a sharp drop to $350-$360 per ounce while others said it was on its way up to the $450 per ounce range.

Mining consultant Leonard Harris of Veneroso Associates market analysis firm said speculators who have taken huge, leveraged long positions in gold futures contracts encouraged by low U.S. interest rates will leave the market in the short term, taking gold prices down to $350-$360 per ounce,

Speaking at a gold industry forum in Lima, Harris took a bearish position that contrasted with analysts from Goldman Sachs and Gold Fields Mineral Services, who told delegates that gold was heading for $450 an ounce, or even higher.

"If speculator interest in gold contracts further we expect the price might be taken down to $350-$360 level," Harris said.

Gold peaked in January at 15-year highs of $430.50 an ounce but has since retreated. On Thursday June gold on the COMEX metals division of the New York Mercantile Exchange closed at $388.40 an ounce.

"Record net speculator long positions encouraged by low U.S. interest rates will correct. This correction is inevitable," Harris said.

He said speculative positions in gold futures are at an all-time high of 600 tonnes on COMEX and overall speculative positions, including over-the-counter transactions, could run into thousands of tonnes.

The reason speculative positions in gold are so huge, he said, is that normally conservative institutions like pension funds and private banks have invested in commodities as a hedge against what are seen as possible deliberate measures by the U.S. Federal Reserve to raise inflation.

"The recent explosive rise in commodities prices is due to a degree of speculation with no precedent," he said. "There is currently great vulnerability in commodities prices."

Near term outlook will depend on leveraged speculators, whose sentiment will be directly affected by a slowdown of Chinese growth, which has driven demand for commodities, or by a strengthening dollar.

He also said that unless U.S., European and Japanese growth exceed expectations there is little reason to expect continued support for today's commodity prices.

THE BULLS SPEAK

Alberto Arias, leading mining analyst for Goldman Sachs told the conference that he sees an average price of $417 per ounce over the coming months, ranging between $380 and $450 per ounce.

"There is not enough (mining production) capacity so we think the cycle will go forward and there are more peaks ahead," Arias said.

He also cited what he said was a continued weakness of the dollar due to U.S. trade deficits, and an anti-hedging sentiment among the big gold producers as incentives to higher gold prices.

Arias said the next two years were a critical time for miners to generate new projects by investing in exploration.

Exploration investment fell from 1997 to 2002, and just started to pick up last year as commodities prices soared.

Bruce Alway, analyst with London-based Gold Fields Minerals Services, a leading industry body, had earlier in the week told the conference that he sees gold at $390-$450 this year.

Alway told Reuters that the fact that gold was already climbing off of last week's lows showed that the speculators have fallen out.

Copyright 2004, Reuters News Service