March 24 (Bloomberg) -- Gold prices may surpass a record set in 2008 on a 21 percent surge in investor demand this year, CPM Group said.

Investment demand for gold will rise to an all-time high of 52.3 million ounces this year, New York-based commodity- researcher CPM said today in its annual outlook report. That compares with 43.3 million ounces in 2008. Demand for gold to make jewelry will drop 7.1 percent to 56.5 million ounces as consumer spending weakens, the group said.

Gold prices have gained for eight straight years as a declining dollar and instability in financial markets boosted the metal’s appeal as an alternative asset. The price touched a record $1,033.90 on March 17, 2008.

“Continued volatile and weak financial and economic conditions are expected to be supportive of strong investment demand this year,” CPM said today in a summary of some parts of the outlook report. “Gold prices are expected to surpass last year’s record.”

Gold futures for June delivery fell $28.80, or 3 percent, to $926 an ounce today on the Comex division of the New York Mercantile Exchange. The most-active contract still is up 4.7 percent in 2009.

Gains for the metal will continue this year as investors seek a durable haven from uncertainty, CPM said. The U.S, Japan and Europe are in the first simultaneous recessions since World War II. The Standard & Poor’s 500 Index tumbled 38 percent last year, the most since 1937. In the 2008 fourth quarter, U.S. household wealth plunged 18 percent from 2007, erasing $11.2 trillion in value, the Federal Reserve reported on March 12.

Wealth Preservation

“Investors are concerned about the preservation of the value of their assets amid the massive destruction of wealth over the past year,” CPM said. Gold will rise “as investors look toward safe-haven assets in these volatile times.”

Supplies of gold, including mine output and recycling, will rise 3.3 percent to 118.6 million ounces this year, CPM said. Mine production will advance 3.4 percent to 57.2 million ounces this year from 55.3 million in 2008, the company said.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.

Last Updated: March 24, 2009 17:31 EDT