Worry over inflation and an age-old quest to possess objects of desire have teamed to drive up gold prices, say mining executives and sector analysts.

Gold, which sells for around $640 an ounce, rose to a 26-year high of $730 an ounce in May as investors seeking more tangible assets flooded commodities markets.

"In just a year, from the 2005 to the 2006 June quarter, the quarterly average Australian dollar gold price has risen from A$556 to A$840 an ounce," Sandra Close, a gold analyst for Surbiton Associates said on the side of the Digger and Dealers mining conference.

Gold's role as a safe-harbour investment and its negative correlation with the U.S. dollar is putting new shine on one of the world's oldest commodities, analysts said.

Gavin Wendt, a mining analyst for sector research group Fat Prophets said demand for gold was increasing in step with rising oil prices and looming inflation, as more investors saw bullion as a safe bet against a devalued dollar.

Labelled by some as a currency of last resort, gold can perform well when other markets sour, as the metal tends to trade inversely to the U.S. dollar.

Ian Smith, managing director of Newcrest Mining Ltd. said gold could trade as high as $1,000 an ounce if the current investment climate persists.

"This is certainly in the realm of reality," Smith said.

Gold recorded its highest selling price of around $850 an ounce in 1980.

Meanwhile, a lack of investment in new mines by gold miners in the 1990s as bullion prices lagged meant that new supplies of gold were lagging demand, driving up the price, Wendt said.

The price of gold has mostly gone up since 2001, a tumultuous year, when a 20-year bear trend was snapped. Gold that year rallied by as much as 76 percent.

"I look at a gold mine as an ATM (automatic teller machine)," Tommy McKeith, chief executive of Troy Resources N.L., which mines about 100,000 ounces of gold a year from lodes in Australia and Brazil.

Eventually, gold miners would develop more mines, which will create more of a supply and demand balance, according to Goodlace.

Gold Fields Ltd. said strong demand from investors and a healthy gold jewellery market were temporarily propping up bullion prices, Terence Goodlace, head of operations for the world's fourth biggest gold miner said.

"We see gold in the longer term at around $475 an ounce," Goodlace said. "In the short term we see a strong gold price, but ultimately we see it coming down.

Goodlace said Gold Fields was exploring for new lodes globally, including in South Africa, Venezuela, Australia and China.

Gold investment dates back thousands of years. The Sumer civilisation of what is now Iraq first used gold to create jewellery in around 3000 B.C., employing forging techniques mastered by the Egyptians.