Predictions that gold prices will fall over the long term have underestimated the strength of demand in Asia from investors and central banks, according to World Gold Council managing director of investment Marcus Grubb.
The council, which represents the world's largest gold miners, believes bullion prices can extend a decade-long bull run in the long term despite the deepening European sovereign debt crisis sending gold prices down from the record high of US$1,923.70 an ounce seen in September last year.
Gold, a safe-haven asset, has fluctuated within about US$50 an ounce on either side of US$1,600 for most of the past two months, as speculation of a possible third-round of monetary policy easing, in the form of purchases of government bonds and other debt instruments by the central bank, did not materialise.
However, comments by US central bank head Ben Bernanke had some analysts thinking it may be deferred instead of ruled out.
Some market pundits, including analysts at British bank RBS, say gold prices will ease in the long term despite rebounding in the short term from present levels after an 18 per cent correction since September.
They tipped average gold prices to rise to US$1,800 an ounce by this year's fourth-quarter, when it will see its 'last hurrah' and trend downward to an average US$1,200 an ounce by 2015.