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Mumbai Jan. 19 Gold prices could track higher in the first half of the year so as to reach $ 670 an ounce levels. But there is less certainty that the market could breach $ 700 and surpass the recent high of $ 725, though it could occur further into the year or possibly in 2008, especially if the situation in West Asia deteriorates significantly, driving crude prices higher, according to Mr Paul Walker, CEO of precious metals consultancy GFMS.

In its latest `Gold Survey 2006 - Update 2', GFMS said investor interest in gold would be the prime driver of the market, spurred by expectation of dollar weakness. In addition, a slowdown in the US economy and disappointing returns on conventional assets such as equities should lift gold.

The pick up in jewellery demand in the second half of 2006 may well continue into the current year, the report pointed out ascribing the robust demand to the buoyancy of economic growth in countries such as China and India.

Scrap sales are not expected to be substantial in the current year and may actually decline year-on-year, as the market has come to perceive $ 600-650 levels as normal.

It would take a steep price spike to motivate larger scrap sales, the report asserted.

On the negatives for the price, the consultancy pointed out that mine output fell two per cent to 2,467 tonnes in 2006; but the first half of 2007 may witness a year-on-year growth, while overall dehedging may return to a normal level of under 200 tonnes versus 2006 first half total of about 300 tonnes.

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