The precious metal, which in March struck a record $1,032.50 per ounce, hit a four-month low at $845.90 on Thursday, but Birch reckons the general trend higher is still intact.
"There is no reason why the broad up trend should be over but clearly the extreme market events that pushed it up to over $1,000 have dissipated," Birch, who is also the manager of the BlackRock ML Gold & General Fund, told Thomson Financial News. "I don't think that moving from $1,000 to $850 is the start of a big bear market for gold."
Gold has surged 187 percent in the past six years and is up 26 percent from this time last year.
"Is the broad commodity cycle for gold over? No. The reason why gold has been in a bull market is supply and demand, it's been the fact that mine production has fallen worldwide. Demand from investment and jewellery demand added together is quite good," Birch said.
Rampant fears of recession, record dollar weakness and sky-high oil prices lifted gold to its four digit peak in March.
Gold trades counter to the dollar as it is seen as an alternative asset, in line with high oil prices as investors hedge against inflation and is bought in times of economic turmoil as a reliable store of value.
"What drove gold above $1,000 was an extreme amount of fear that the financial world was in great peril and it was hours away from a cataclysmic collapse," said Birch.
U.S. central bank intervention and moves by major banks to repair some of the damage inflicted by the credit crunch have eased those fears, but investor interest in commodities as alternative assets remains strong.
"If the banking crisis enters a new scary phase, that will attract more attention to gold," Birch said.
Meanwhile on the fundamental side, gold prices above $1,000 had crippled demand from jewellers, but that interest is coming back now prices have retreated from the highs.
"Those customers are going to start coming back," said Birch. "Who knows what for the very short term but I'm not bearish about gold for this year," Birch said.
