Miners currently needed a gold price of $1300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.

“If this continues for the next five years the gold price needs to be at least $3000 just to stay in the business,” he said. However, he was optimistic sustained demand would drive prices higher over the long term.

Spot gold fell to a four-and-a-half month low of $1,556.5 an ounce on Monday on concerns over the European debt crisis. Normally a refuge for investors in times of economic turmoil, gold has recently traded in line with risk assets like base metals and stocks.

Future demand would come from emerging markets, central banks and investors, Shishmanian said, noting that China and India now represent 55 percent of the world gold market.

“Emerging markets are going to hold increasing amounts of gold reserves,” Shishmanian said. “Holding billions of dollars doesn’t help them. The alternative potentially is gold.”

Exchange traded funds backed by gold currently hold $120 billion, he said.

“This is the tip of the iceberg,” he said. “US pension funds do not hold substantial amounts of gold but we see that changing over the next 20 years.”

An upturn in the gold price is likely once current Greek turmoil crystalises, says World Gold Council investment MD Marcus Grubb.

Current global macroeconomic concern is seen as a contributing factor to gold’s gradual fall since the end of February, when US Federal Reserve chairperson Ben Bernanke revealed that there would be no more quantitative easing in the near term in the US, which also led to a sharp fall in equities.

“It’s not a gold phenomenon. We’re basically seeing investors raising cash weightings again as the international economic picture begins to look deeply concerning again. There are also rumours of more bank rating downgrades to come,” said Grubb.

Gold fell 1 percent last week, in tandem with equities and other commodities, as fear about Spain’s debt crisis raised concerns about global economic growth and dented risk appetite.

Investors largely ignored the HSBC Flash Purchasing Managers Index which showed that China’s factories stabilised in April as output ticked higher, new business rose from multi-month lows and export orders perked up.

Fed Meeting

All eyes are on the Federal Open Market Committee meeting on Tuesday and Wednesday, as the Fed’s attitude towards more monetary easing remains vital to gold’s fortunes. Bank of Japan will meet on Friday, and is expected to ease again.

“We probably won’t see much move before the Fed meeting, as people are sidelined and waiting for new cues from the Fed and Bank of Japan,” said Yuichi Ikemizu, head of commodity trading, Japan, at Standard Bank.

Spot gold moved in a range of $3 and traded nearly flat at $1,640.61 at 0655 GMT. US gold was little changed at $1,641.60.

Expectations of more money printing by the Fed pushed gold to nearly $1,800 in February, before a less dovish stance taken up by Fed officials sank bullion to about $1,611 in early April.

Gold prices have been stuck in a range between $1,610 and $1,680 since the beginning of April, facing headwinds from diminishing hopes of more easing from the Fed, while price sensitive physical buying lends support to the lower end of the range.

“There is still pressure for gold prices. The market has been trying to push the support level at $1,630-$1,640, although the push is rather half-hearted right now,” said Nick Trevethan, senior metals strategist at ANZ in Singapore.

Europe’s Problems Continue

Europe’s fiscal health also remains a concern. Spanish and Italian bond yields were still near dangerously high levels, while the prospect of a Socialist candidate winning the French presidential election added to worries whether the powerful Franco-German ally that has helped set tones in the region’s battle against its debt problems will remain intact.

Gold – Long Positions

Trading interest in gold remains sluggish as investors lack conviction in the direction of market. Money managers raised their net long positions in US gold futures and options in the week ended April 17 to 112,275 contracts, from 109,511 contracts a week earlier – its lowest in more than three years.

However the short term price of gold could largely be down to the value of the US dollar which is gaining against the euro on currency markets.

Worries about upcoming debt auctions in Italy and the Netherlands and concerns about a possible political backlash against austerity measures could keep the single currency in check in coming days, traders said.

Latest Gold Prices

Spot gold inched up 0.2 percent to $1,652.84 per ounce by 0626 GMT, after touching a one week low near $1,634 in the previous session. US gold gained 0.2 percent to $1,654.30.

The most actively traded contract, for June delivery, gained $1.40, or 0.1 percent, to settle at $1,651.10 per ounce on the Comex division of the New York Mercantile Exchange on Tuesday.

Euro Concerns

“The nervousness around the euro zone has eased a bit, which could help stabilise the euro and support gold prices,” said Shanghai CIFCO Futures analyst Li Ning.

But Li added that market sentiment remained cautious ahead of a policy meeting by the US Fed next week, after comments from the Fed over recent weeks have caused sharp price fluctuations.

Adding to the cautious tone were lingering concerns about Spain’s finances. Although Spain managed to exceed the target at Tuesday’s debt auction, it was forced to pay a stiff premium compared with a month earlier, boding ill for a key long term debt sale on Thursday.

“One side of the coin is that equities continue to perform very well, which at one point could weigh on gold. The other side of the coin is that the European debt crisis continues to deteriorate and that should be supportive of gold. So we have a bit of a status quo,” said Graham Leighton, director of precious metals at Newedge.

Weaker US Dollar and Gold Prices

A weaker US dollar, which eased against a basket of international currencies, also fanned interest in gold futures. Gold is priced in dollars and seems cheaper to investors who hold other currencies when the dollar softens. The ICE US Dollar Index was recently down 0.1 percent at 79.474.

Latest Gold Price

The most actively traded gold contract, for April delivery, fell $20.30, or 1.2 percent, to settle Tuesday at $1,647.00 an ounce on the Comex division of the NYMEX.

Gold Import Duties for India

Jewellers in Mumbai and other parts of India are on a three day strike to protest the Indian government’s hike in customs duties and a consumer tax on gold imports.

Some 700 jewelers in Rajkot, Gujarat, 3000 jewelers in Ahmedabad and Surat and more than 1200 jewelers in Mumbai, from the famous Zaveri Bazar area have also threatened to continue the strike for an extended period, some say indefinitely, if the government does not retrace its duty cuts.

The Indian government has launched more measures to curb the spending on gold consumption in the country by raising customs duty for gold bars and coins, platinum and gold ore in the Union Budget for 2012-13 presented to Parliament last Friday. This is the second time the country has raised taxes on gold imports following dissonance among economists in the country over record purchases that had widened the current account deficit.

Finance Minister Pranab Mukherjee announced the hikes in his Union Budget speech. Customs duty on standard gold has doubled to 4 percent from 2 percent, and the customs duty on non standard gold has also been hiked twofold to 10 percent from 5 percent.

The immediate effect is bound to be severe. Consumption of gold and silver in India is set to significantly drop as a consequence of the country’s decision and hence, world gold prices are taking another hit.

Latest Gold Price

The most actively traded contract, for April delivery, fell $3.70, or 0.2 percent, to settle at $1,655.80 a troy ounce on the Comex division of the NYMEX. Gold finished the last week negative by approximately 3.25 percent overall. Year to date, gold is still up 5 percent.

The ICE US Dollar Index hit a fresh seven week high last Wednesday, also bearish for the precious metals markets, with the index closing off Friday’s session at 80.51.

Many strategists continue to see good prospects for gold in 2012 but one of the few events that could change this outlook, the return of US central bank tightening of monetary policy, attracted some attention this week and caused additional weakness to the price of gold and silver.

US Monetary Policy – QE

The US Federal Reserve unsurprisingly kept monetary policies unchanged at its FOMC meeting but it provided a more optimistic outlook for the US economy, saying that the pace of growth in coming quarters would be stronger than previously expected.

This projection has once again lowered the expectation for additional quantitative easing and raised doubt about whether the Federal Reserve will maintain rates at low levels until 2014 as previously announced in January.

Meanwhile, banking giant Credit Suisse said that investors continue to favor risk over haven instruments like Treasurys, and gold is further hampered by a rally in the US dollar.

“We believe there is room for further falls in the gold price in the short term but having already dropped by more than $70 in three days we are wary of a short covering bounce.” Credit Suisse said.

Spot gold futures lost nearly 4 percent last week, after US Fed chairman Ben Bernanke disappointed the market by omitting any reference to further monetary easing in a congressional testimony, helping the US dollar to jump higher. A stronger dollar tends to cap commodity prices as they are priced in the US currency.

The Floor for Gold Prices

Gold prices have since rebounded and found solid support at the $1700 level, as investors remain confident in gold’s appeal as real interest rates remain low and inflation remains a longer term concern.

“There isn’t much room on the downside for gold, because the sharp fall last week was an over reaction to an unfulfilled expectation. We are likely to see gold seesaw in the $1700 and $1800 range in the short term, as investors wait for a new stimulant.” said Hou Xinqiang, an analyst at Jinrui Futures, China.

But Hou said gold’s short term technicals might have weakened after several recent attempts to breach the key resistance at $1800 failed.

Spot gold was little changed at $1712.79 an ounce in afternoon trade. US gold edged up 0.3 percent to $1714.20.

Latest Gold Price

Gold futures rose in trading on Friday with the most active April gold contract on the Comex division of the NYMEX settling at $1,735.40 an ounce, up just over 4 percent on the week, whilst March silver settled at $33.790 an ounce, up nearly 7 percent on the week.

Central Banks Buying

George Gero, vice president, global futures and precious metals strategist at RBC Capital Markets, said although the market saw some selling ahead of the weekend Friday, he expects gold prices to rise next week.

“Gold is continuing to find favor with technical traders. Open interest is up, momentum is up. We’re looking for China to return to the market next week and the central banks have been buying.” Gero said.

“Support is at $1,700 and resistance is at $1,775 an ounce.” Gero added.

“Gold is behaving like an asset class, so with the uncertainty from the euro central banks large institutional managers are diversifying their holdings and gold has become increasing a component of reserve holdings.” said Gerald Chen-Young, chief investment officer at the United Negro College Fund, which invests in the metal.

Investment in Gold Jumps 20 Percent

The Thomson Reuters GFMS annual gold survey, published on 17 January, revealed that global investment in gold jumped more than 20 percent last year to a record $80bn, pushing the price to its peak of $1,920 an ounce in September.

Much of this was due to physical buying of gold bullion particularly in China, Germany, Switzerland and Austria. East Asia accounted for 456 tonnes of the total (up 53 percent), western markets bought 335 tonnes (up 41 percent) and India 297 tonnes (up 9 percent).

Latest Gold Price

Gold for February delivery added $8.10 at $1,639.60 an ounce at the Comex division of the NYMEX. The gold price has traded as high as $1,648 and as low as $1,630.80 an ounce while the gold spot price was up $6, according to Kitco’s gold index.

“Some people will sell into strength as gold moved above the 200 day moving average,” a key technical level, says Will Rhind, head of US operations for ETF Securities.

Rhind thinks that some more negative news out of Europe will help gold as investors buy it as a safe haven. “What we’re seeing right now is that emergence of that store of value, that safe haven trade.”

China Buys Gold

Evidence of strong buying from China was propping up gold prices today. China imported a record 103 tons of gold from Hong Kong in November, up 19 percent month on month and a 483 percent increase year on year, according to Goldcore, a bullion dealer.

“As Chinese people’s disposable incomes gain and concerns grow over inflation and equity and property markets, Chinese consumers and investors are turning to gold as a long term investment hedge,” says Goldcore in a recent note.

Latest Gold Price

Gold for February delivery was adding $28.20 at $1,636.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,641.40 and as low as $1,609.20 an ounce while the spot price was up $23, according to Kitco’s gold index.

Gold got an extra boost Tuesday as the US dollar drifted lower on news that rating agency, Fitch reaffirmed France’s triple A credit rating. Investors have been waiting for a downgrade from Standard & Poor’s and were worried other agencies would follow suit.

“We do need to close above $1,635 to really cement being in the midst of this range.” says Stan Dash, vice president of applied technical analysis at TradeStation.

Dash thinks that stocks and gold are still moving in tandem. “In the first 35 minutes of trading, the stock market backed off a little bit and so did gold. It backed off $5-$6 an ounce.” Dash thinks that means gold is trading as a commodity, a riskier asset, versus a currency or a safe haven.

Gold has been making steady gains in the last few years. It almost gained 8% in 2011, it’s 11th straight year of gains that outperformed many commodities and stock indexes. The record price for gold was made when gold reached $1,920 per ounce in early September 2011.

Gold is often viewed by the wealthy investors as a safe hedge against inflation and as a haven against the devaluation of paper currencies.

Latest Gold Price

Gold for February delivery was adding losing $2s at $1,610.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,626.80 and as low as $1,605.60 an ounce while the spot price was down $3, according to Kitco’s gold index.

Gold Buying Safe Haven?

Higher gold prices seem to still be held lower by a stronger US dollar, weaker euro and volatile stock market. Gold’s connection to the “risk on trade,” meaning that the metal has been rallying alongside stocks and the euro, can mean that gold is not being traded as a safe haven.

However, gold prices have also seen an upside as concern over Iran’s nuclear program fueled oil and gold price rises this week. Tensions between Iran and western countries escalated after the EU reached a preliminary agreement to ban imports of oil from Iran, prompting investors buy back into gold, which is seen by many as a safe haven asset.

Latest Dollar Index Rate

The ICE US Dollar Index, which tracks the US dollar against six major world currncies was trading at 81.135 14.20 GMT today, from the session open of 80.425.

Latest Gold Futures Price

Spot gold futures was last up 0.4 percent on the day at $1,607.90 per ounce by 15.30 GMT, having risen by as much as 0.8 percent to a session high of $1,614.08, while most active COMEX February gold futures were up 0.6 percent at $1,609.32 per ounce.

Impact on Oil and Gold Prices

The decline in gold prices towards the end of 2011 appears to have lured some buyers out of the woodwork following a fairly lacklustre previous few weeks, due in large part to the weakness in the Indian rupee against the dollar, which suppressed demand in the world’s largest consumer of gold.

“With 40 percent of the world’s internationally traded oil moving through the Strait of Hormuz, even a low probability of the strait’s closure can have a material impact on oil and hence on gold prices.” James Steel, analyst at HSBC, said.

Betting On Gold Prices

Gold outshone other asset classes last year and it is expected to continue its uptrend in the long term, but in the short term, some investors still remain cautious to buy back into the precious metal.

However, when gold and silver prices were falling in the autumn of last year, some traders went long in the gold/silver ratio and made money. This is a curious case of an investor making money by going long in underlying commodities, the prices of which were falling.

Latest Gold Futures Price

Gold for February delivery was up $38.60 at $1,605.40 an ounce at the Comex division of the NYMEX. The gold price has traded as high as $1,608.70 and as low as $1,566.80 an ounce today while the spot price was up $36, according to Kitco’s gold index.

It’s All About The Euro

“It’s all about the euro. Gold can’t sustain the rally for just a day.” says Anthony Neglia, president of Tower Trading, who says that higher gold prices have more to prove despite the fact that they bounced off $1,523 an ounce, a key technical level.

Neglia, who is selling rallies and needs to see gold close over $1,625 an ounce to get more optimistic.

A weaker US dollar and stronger euro were helping support higher gold prices. However, those remembering gold’s volatility, that gold closed down 18% from its intra day high of $1,923 might be reluctant to bet big on gold unless it rockets higher.

In 2011 investors saw Gold perform outstandingly in the quiet season in July and August. $2,000 and ounce looked a certainty before the end of the year, but then unusual forces pummelled the gold price and all other global financial markets.

We will have to wait and see what this year brings for gold prices however clues to future direction could come from suggestions that certain African countries will nationalise their mining industries and that the US will again confiscate gold from its citizens in a move that would allow it to suppport a global financial recovery.

And maybe John Soros (one of the world’s leading gold bugs) knows something we don’t – he has been selling gold.

If anyone knows for sure that the price of gold will be in three months, six months or a year, that person could make huge profits. For the rest of us, volatility in the gold market is difficult to out manoeuvre.

Latest Gold Price

Spot gold futures fell nearly 1 percent to $1,582.84 an ounce, before recovering to $1,593.29 by 07.03 GMT this morning, extending last week’s loss, which was the biggest in nearly three months.

Gold Price Forecast

The bleak forecast, coming after gold has lost 11 percent of its value so far this month, is likely to fuel fears that gold futures are close to ending more than decade long bull run and gold could be entering a bear market.

Almost half of respondents predicted bullion will fall to $1450 an ounce in the first quarter next year, with three seeing prices as low as $1400 an ounce.

The forecasts come after a dismal performance last week when prices hit a 10 week low of $1560 and gold lost its safe haven status.

“What is surprising is that in an environment where headline risk news is bigger than ever, gold has actually fallen from its highs. We believe that, in 2012, of all metals gold will be the worst performing.” said Christoph Eibl, CEO and founding partner of the Swiss commodity hedge fund Tiberius.

Gold in recent months has lost its safe haven allure, as the euro zone debt crisis squeezed US dollar funding in the market, pushing up borrowing costs. The turbulence in financial markets has also forced some gold investors to cash out their gold positions to cover losses elsewhere.