Gold prices to go up in 6 to 12 months: GFMS

In the next six to twelve months, gold prices are seen to be extremely volatile and are expected to touch $500 per troy ounce, according to Paul Walker, chief executive officer, GFMS Ltd, a London-based consultancy.

"With the twin-deficit problem in the US, and the country borrowing to pay the interest on borrowing, the imbalances are too large for the economy to pick up in the near future. In this scenario gold is seen to be distinctly up," Walker said speaking on the sidelines of the India International Gold Convention in Mumbai.

He reiterated that the interest in gold is likely to be speculative with the volatile currency markets. While gold is considered as a hedge against inflation, it is seen to give limited exposure in comparison to equities.

However, through exchange traded funds that have been launched recently more investors can take exposure in gold.

As far as India goes, an expected normal monsoon, with a fairly robust economy is expected to spawn unprecedented demand for the yellow metal in the coming few months, Walker pointed out.

"The demand from India is likely to be the strongest we've seen since 1998," he said. India is already reported to have imported over 500 tonne of gold in the first half of the calendar year, which is almost the entire imports last year, which stood at 560 tonne.

This, is despite the gold that is used to manufacture jewellery, which is exported for financial purposes.

However, the pattern for investment is seen to be changing among Indians. "Indians seem to prefer investing in purer forms of gold, where the spread between buyers and sellers is larger," he said.

While earlier, jewellery accounted for maximum investments, followed by bars, coins and industrial uses like 'zari' or brocade, Walker said that the demand for bars and coins was growing at a faster rate than jewellery.