Investors seek a safe haven as the greenback is dogged by fears over the size of the US deficit and the robustness of a US recovery.

Analysts expect gold to hit at least $470 per ounce early in the new year. And they say that the precious metal could well test the magical $500 barrier if the US dollar weakness prevails.

Gold has broken through $500 during only two cycles since 1980, including hitting $502 in 1987.

On both occasions it proved the peak of the gold price cycle.

Kamal Naqvi, a precious metals analyst at Barclays Capital, says in a note: “We can expect gold to test resistance towards $470.”

Ross Norman, an analyst at TheBullionDesk.com, says: “We are fundamentally bullish. We think that $475 and possibly even $500 could be seen next year.”

Even at $470, gold would be trading at its highest levels since the late 1980s.

The bullish outlook for gold coincides with upbeat expectations that other commodity prices will enjoy another stellar run in 2005.

The insatiable appetite for raw materials such as copper, aluminium, platinum and nickel is fuelled by the roaring economies of China and India, as well as signs of economic recovery in the US.

There is more demand for commodities than mining companies could supply.

With a substantial time lag before new mines are brought into production, the generally buoyant conditions are expected to continue.

Global copper demand this year outstrips supply by 660,000 tonnes, and even a flood of new operations prompted by the bullish market conditions is unlikely to prevent another deficit in 2005.

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