Strong forecasts for gold price

Analysts are predicting that the gold price will remain high in the short to medium term.

Having exceeded $700 per ounce at the end of last week, the price has so far remained above that mark for a longer period than when it peaked in May 2006, at around $730.

The gold price is established by many factors but two of the major ones, a strong oil price and a weak dollar, are clearly evident and expected to continue.

This has led to speculation that the price of gold will consolidate between the $700 and $710 range, although some are expecting it to rise further.

According to the chief executive of GFMS, the metal markets consultancy, $750 is possible in the short term.

Gold is currently gaining ground as a “safe haven” holding for investors riding out the current turmoil in the financial markets.

Initially, the metal was slow to respond to the liquidity problems caused by the US sub-prime mortgage crisis, because some institutions were forced to sell gold to meet the demands of the moment.

However, once this period passed the price of gold rose rapidly, despite the widely held view that the full outcome of the liquidity crisis has yet to be seen.

Investors will probably see the metal itself as a safer bet than gold mining stocks, as mining operations generally are finding it difficult to grow profit in the face of increasing costs.

This situation will not be helped by higher oil prices and strong commodity prices, which are already impacting on the cost of mining equipment and supplies.