Gold 'will breach $700' this year

Gold Fields Mineral Services (GFMS), the London based precious metals consultancy, says the gold price could break through the $700 per troy ounce mark in the last quarter of 2006 on the back of higher demand from investors.

"Investor buying over the last quarter of 2006 could drive the gold price back through the $700-mark," said GFMS chairperson Philip Klapwijk, in the release of the group's updated Gold Survey 2006.

The group says its forecast is based on a number of factors including a bleak outlook for the US economy and therefore the dollar, Middle East tensions remaining extremely volatile and the continued threat of global terrorism.

Global slowdown 'bad news'

"All the above make gold's safe haven properties particularly attractive," says the release.

On the downside, GFMS indicates that a global economic slowdown could have an adverse effect on gold investment.

"Such a development is expected to hurt the overall commodities complex, triggering liquidations in gold."

Over the past week and a half the gold price has fallen from levels above $630/oz to below $580/oz on Thursday.

GFMS addresses this issue saying that gold is expected to suffer some losses but that a "full blown exit by investors" will not occur.

"...the problematic nature of the world economy and particularly in the United States, is expected in time to boost gold's attraction as a safe haven asset and probably outweigh the negative impact of the bursting of the wider commodity bubble."