By Sreekumar Raghavan
The World Gold Council has forecast that gold prices could soon touch the crucial $1,000 mark very soon due to rising production costs and dwindling supply.

Gold is presently trading near to $930 levels although there was a bounce visible in its prices this week thanks to spurt in Crude Oil and equities.

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, said holdings stood at 1,072.87 tonnes as of July 30, unchanged from the previous business day, when they fell about 1 percent, Reuters reported.

Meanwhile, what lends credence to the bullish forecasts about gold coming from various quarters is the announcement by AngloGold Ashanti Ltd (NYSE: AU) that it has undertaknen an extensive restructuring of its hedgebook in July reducing its overall commitments by about 1.4Moz, in order to realize its strategy of maximizing exposure to spot gold prices.

According to conventional wisdom if gold miners are holding onto their hedges or increasing hedge exposure, it signals a bearish sentiment or outlook ahead in to the future.

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The World Gold Council data for Q1 2009 showed that producer-dehedging was almost flat which signaled a mixed sentiment towards prices which is neither bullish nor bearish.

"We've worked hard to strengthen our balance sheet and that gave us the flexibility to skin the hedge book by getting it well below one year's production," Chief Executive Officer Mark Cutifani said. "The market fundamentals are extremely robust for gold, which supported our decision move aggressively sooner rather than later, to ensure we maximize our exposure to spot prices."

The decision was taken in July 2009 to invest $797m to reduce the company's overall hedge position, after the successful issue in the second quarter of a five-year convertible bond and the receipt of the first tranche of the proceeds from the sale of the company's Boddington stake. The company now expects to achieve a 7% discount to spot Gold prices at $950/oz gold price, with the hedge book reducing by approximately 800,000oz a year, until it winds up at the end of 2014.

AngloGold Ashanti's overall hedge commitment declined to 4.47Moz at July 25, less than one year's production. That compares with 5.84Moz at the end of the first quarter. The committed ounces are expected to decline further, to about 4.1Moz by the end of 2009, a full year ahead of target.

Gold Core Bullion Serices Team in an analysis published in FXStreet has also underscroed the long-term bullish view for gold despite the fact that in the near term it could even fall to $905 if the metal does not hold above $945 as increased risk appetite following better than expected US jobless figures and equity rally could temporarily dull the yellow metals prospects.

Many factors appear to favour bullish gold including the stimulus packages in various countries that devalue their currencies against gold and WGC forecast of rising investment demand that surpassed that of jewellery in first quarter this year.Analysts have pointed out that despite bullish prospects investor exposure to the yellow metal ideally shouldn’t exceed 20% of their portfolio.

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