Gold hit a record price of $1,609.5 an ounce on Tuesday – up 8.9% from the low of $1,478, to which it eased on 1 July – in the wake of steep losses in equity markets following stress tests of European banks and amid stalled talks on raising the US debt ceiling. ‘This bull market has a long way to run because none of the underlying issues that have led to the gold price running so much are gone; they’re more pressing than ever,’ says Andrei Kroupnik, analyst at Collins Stewart. Pointing to buying in China and India, he adds: ‘You’ve got inflation, especially in the emerging markets; you’ve got fear of currency devaluation and the debt crisis.’ The recent lurch higher in gold spurred Saxo Bank to forecast it consolidating in the $1,500-1,600 range, but possibly pushing towards $1,650 in the coming months. Kroupnik, however, cautions that the rally was heavily dependent on ‘political developments.’ And Kieron Hodgson, analyst at Charles Stanley, warns of the danger that ‘we could be at the peak of the concern cycle.’ Should EU leaders ‘cobble together a suitable resolution for the European debt situation’ and US lawmakers agree a suitable debt reduction plan, ‘I think there would be the danger gold could just come off slightly,’ he says. Nonetheless, Hodgson says that the longer prices remain at historic highs, gold miners were likely to deliver ‘positive surprises’ in earnings, amid ‘assumptions that gold will mean revert to lower levels.’ He cites African Barrick Gold (ABGL.L) as one such firm. Yet he notes that the miners still have to perform operationally. ‘Operational performance is no excuse for a failure to capitalise on a strong commodity – and you need both elements working in conjunction, and I think that’s where a lot of the issues have been,’ Hodgson says. Kroupnik agrees that large UK-listed miners such as African Barrick, Randgold Resources (RRS.L) and Petropavlovsk (POG.L) had not performed well recently, often due to ‘company-specific’ matters. Indeed, the three miners have seen their share prices drop 18%, 7% and 32% respectively in the past year, amid rising costs and political upheaval. But Kroupnik adds: ‘I think that the market... will start recognising that some of these companies are making a lot of money.’

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