MUMBAI (Commodity Online): Is it prudent for investors to continue banking on Gold in 2010 also after the unprecedented surge in prices of the yellow metal in 2009?

Analysts are divided over this issue. With 2009 coming to an end and the global economic scene looking bright with India and China posting surprise economic growth, gold’s doomsday value has certainly come down. But still the yellow metal prices are on the rise showing no signs of a price correction.

Gold closed at a record high of $1,215.30 in December, well up from its low of about $817 per ounce in January 2009.

And, many analysts see no downfall for gold prices in the immediate future and they think that the prices will come down only when the world becomes a safer place to live in.

Average production costs for gold miners are about $700 per ounce. Historically, times of economic hardship are when gold rises in value, and in booms it falls.

The situation is complicated because as the world emerges from recession inflation threatens, and gold typically is sought as a hedge against inflation.

Few market observers are confident enough to call the end of the latest world economic crisis, but there are some who have forecast that the worst is over.

But Gold has a habit of making forecasters look foolish, and guessing what is around the corner can be tough.

When everyone says gold is going to rise, it is almost certain it is going to come off, as people take profits.

However, some analysts said gold will settle around $1,200 or $1,300 per ounce for a while and then go up towards $1,500.

A month ago everyone was talking about the gold price going back down to $1000 or $900. But the market has become adjusted to accepting a gold price around the current level.

India and China value gold culturally more highly than other nations, and there is not enough supply of the metal to keep up with the accelerating rise in demand. It seems central banks agree with his upbeat assessment.

India’s central bank recently bought 200 tonnes of gold, worth $6.7 billion, while Russia's central bank purchased a smaller but still significant 15.6 tonnes.

The central banks are going to continue to buy it, the Chinese are going to continue to buy gold, India is still a steady buyer.

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