The downturn in gold prices will not make a huge dent in second-quarter profits, experts say, pointing out that prices are still much higher than this time last year.

"It was a progressive rally between March and May and then fell from May through to June, so at the end of the day I don't think the current quarter is going to look that bad compared to the first quarter," said Geoff Stanley, precious metals analyst with BMO Nesbitt Burns.

"The spike on the way up was so sharp that there really wasn't a huge amount of it that actually impacted on the June quarter."

The price of gold climbed from around $550 an ounce in March to a high of $730 in mid-May. Since then, gold has dropped significantly and is now below $600 an ounce.

On Friday, gold futures were off $5.90 at $579.50 due to pressure from a stronger U.S. dollar, which reduces bullion's allure as an alternative investment.

Michael Gray, an analyst with Pacific International, said most analysts did not expect gold to run up above $700. "There is still a pretty decent price from April through to part of May," he said.

Compared with last year, producers are seen benefiting from higher gold prices as bullion traded around $430 an ounce in the second quarter of 2005.

"We are looking at strong year-on-year performances. We will actually see strong profitability reported, but quite clearly it's down from what it would have been in the $700 to $730 an ounce range we had a while ago," said Stanley.

Gold producers agreed. "If $720 had stuck, we would have made more money," said Agnico-Eagle Mines Ltd. spokesman David Smith. "We sell our gold at spot ... so most certainly if gold prices fall than our revenues will fall accordingly," he said.

Mid-tier producer Iamgold Corp. does not anticipate a dramatic change in terms of the average price for the quarter.

"In terms of what we will look like, it will have some impact, but I don't think a significant impact," Iamgold Chief Executive Joe Conway said, noting that results will be "better" than the same quarter last year.

Goldcorp Inc., North America's third largest producer, said a drop in the price from over $700 to under $600 will obviously affect all gold mining companies.

The world's biggest gold producer, Barrick Gold Corp. said that gold at current prices versus two weeks ago could have an impact, though it remained bullish on the outlook.

"Despite the recent drawback, we still see the fundamentals strong and compelling for the longer term," said Barrick spokesman Vince Borg.

"Sentiment in the short term can change but the underlying strength behind the rally of the last few years is still there."

Part of that underlying strength has come from investment in Exchange Traded Funds, which brought a new batch of players into the market. The funds, also known as ETFs, are securities that give investors direct exposure to the precious metal without the hassle of storing or insuring the product.

"The ETF gold has not declined. There are investors who have very strong hands, and that's one of the pluses in this market, is this shift to commodities as assets," said Martin Murenbeeld, a gold analyst with M. Murenbeeld & Associates.

"I would not have expected gold to make a base in the mid-$550 range."