THE price of gold could hit $US1300 an ounce this year and trigger another bout of second-hand jewellery sales. GFMS, the precious metals analyst, has predicted that gold will rise in the second half of this year as investors seek a safe haven from inflation. The higher prices will encourage more scrap sales, which have lulled so far this year after a record 2009. According to GFMS, the amount of gold sold as scrap through jewellers, pawnbrokers and traders, such as Cash4Gold, increased by 27.2 per cent to 1674 tonnes last year. KEY COMMODITY PRICES: gold, sliver, oil, base metals, livestock and wheat The flow of scrap gold was highest in the first quarter of last year and was so great that for the first time more jewellery was being scrapped than made. There was also more gold being scrapped than was produced at all the world's mines during that period. Philip Klapwijk, the chairman of GFMS, said: "For the world to be scrapping more jewellery than it was making shows that the market was under extreme stress conditions last year caused by the financial crisis." The high price of gold last year, which averaged $US972 an ounce, also led to an increase in investment demand. GFMS said that the amount of gold bought for investment quadrupled to 1429 tonnes last year. This was primarily invested through exchange-traded funds, which allow consumers to buy shares in physical gold without holding the metal themselves. Demand for traditional forms of investment gold, such as coins and bars, was also strong and even retailers such as London’s Harrods began to offer bullion. Total global demand for gold increased by 8.3 per cent to 4287 tonnes last year. However, gold used to fabricate jewellery fell 20 per cent to 1759 tonnes because of its high price and reduced consumer spending. GFMS predicted that jewellery consumption would remain weak this year, but that industrial usage would rebound strongly. It said that it expected inflation to be the big driver for investment demand this year.

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