Last Updated : 06 October 2009 at 17:50 IST

Soon, gold at $1600 per ounce!

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JOHANNESBURG (Commodity Online): Those who are wondering where is Gold headed for, here is the answer. The yellow metal is all set to hit $1,600 mark in the coming months. That is if the predictions of the head of one of world’s biggest gold mining companies come true.

After watching the gold price movement, Nick Holland, chief executive of South Africa’s Gold Fields, world’s No. 4 gold producer, said the yellow metal is set to cross $1600 an ounce in the next six to 18 months.

In a month when gold hit more than $1000 an ounce, the head of the world’s fourth biggest gold producer said it could soar to $1600, with some tipping an all-time high of $2,200.

Chief executive of South Africa’s Gold Fields, the world’s No. 4 gold producer, said his prediction of $1,600 an ounce was tied directly to the oil price.

He said some people say oil is going up to $100 a barrel in the next six to 18 months. If that’s true, and if you look at the long-term relationship between gold and oil, you should find that gold would go to $1500 to $1600.

Another analyst said gold will be a reliable investment over the next few years, but it’s unlikely to climb to $1600 unless there are big changes in the global financial markets.

In a review of the metal, the Royal Bank of Scotland confirmed that Gold was a good store of value during financial crisis and advises investor is to have some exposure.

But it says it has not changed its forecast price which, for 2010, is about $1000.

The Association of Mining and Exploration Companies’ chief Simon Bennison said gold producers had a very optimistic outlook over the next 12 to 18 months.

Gold is often used as a hedge against inflation and because of that, oil and gold typically move in the same direction.

Unlike silver, which for industry is rarely retrieved, gold is heavily recycled. If scrap gold fulfils market demand then it is unlikely the gold price will rise and that may dampen prospects of companies expanding exploration and production.

The Royal Bank of Scotland report on gold said total mine production was expected to rise only 1 per cent this year to about 2450 tonnes. Australia’s contribution would be about 230 tonnes.