Price of gold predicted to hit $2000 an ounce by Games

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With growing worries about whether the US will avert a debt default before Tuesday's deadline, spot gold hit an all-time high of $1625.24 today, breaking records for the sixth time in two weeks. But it will go far higher, according to fund manager Fat Prophets - and not because the Games organisers are using more than eight tonnes of gold to make medals.

"The price of gold has a big 12 months ahead," said Greg Smith, managing director of Fat Prophets. "There is a lack of supply - mining output has weakened over recent years and average grades have fallen by around a third since the late Nineties.

He added that jewellery demand in India and China is holding up well despite higher prices.

"Bouts of US economic strength will be followed by further hints of a third round of quantitive easing, which will continue to push gold higher. I wouldn't be surprised to see $2000 per ounce within 12 months," Smith said.

Fat Prophets first turned bullish on gold in 2002 at $260 per ounce.