The price of gold, a mainstay material in industrial electronics, is expected to rise in 2002 to a consensus average $280/ounce, compared to $272 in 2001. The anticipated 3% increase is due to reduced supply and not higher demand from makers of contacts, connectors or other components, notes the precious metals team at Macquarie Bank in London. Their market research note says: "We see the gold price in a higher range because of reduced production, but don't expect a bull rally because of the lack of sustained buying."

Paul Walker, director of Gold Fields Mineral Services Ltd. in London is "mildly optimistic about the prospects for a higher gold price in 2002 due to the improving supply and demand dynamics." He says much of his optimism stems from the assumption that the resilient U.S. dollar, which has been gold's primary nemesis over the past year, will surrender some ground against the euro and other major currencies in 2002. As gold is denominated in U.S. dollars, a weaker U.S. dollar tends to spur global demand for the metal by making it more affordable in terms of local currencies.

Still, Walker frets that the U.S.-led war against terrorism, the Argentine debt default and some of the other storm clouds forming over 2002 could "cut both ways" for the gold market. While gold bullion and other hard assets may be more attractive to investors this year, "hurting global economies" could leave less money in the pockets of investors.

Analysts believe European central bank sales will keep a lid on rise of gold prices this year. The recent introduction of a common currency in the majority of western European countries means there will be less need for gold holdings among the central banks. European nations are very big holders of physical gold stock, purchased to support their home currencies.