China, Australia and the 16 other largest mining nations averaged weekly output of 42.3 tonnes last year, researcher GFMS estimates. Even though prices have fallen 5.8 percent to $US1177.10 from a record $US1249.40 an ounce May 14, the median prediction in a Bloomberg survey of 23 traders, analysts and investors is that it will reach $US1500 by the end of the year.

Buying accelerated as the MSCI World Index of 23 developed nations' stocks tumbled as much as 16 per cent since mid-April and the euro weakened to a four-year low against the US dollar. Holders of ETPs, including George Soros and John Paulson, accumulated a record 1921 tonnes by May 14, eclipsing all but four of the biggest central-bank holdings.

"You could see gold go up another $US1000," said Evan Smith, who helps manage $US2 billion ($2.4bn) at US Global Investors in San Antonio. "All of the turmoil and problems we've seen in Europe is just another reminder that there's a lot of value in gold as a safe haven," he said.

The risk to gold bulls lies in economic growth, which should buoy the prospects of metals linked to industrial demand, such as copper and silver. The world economy would expand 4.2 per cent this year, the International Monetary Fund said April 21, raising its January projection from 3.9 per cent.

Astor Asset Management, with $US520 million under management, held as much as 10 per cent of its assets in the SPDR Gold Trust, the biggest ETP backed by bullion, according to Bryan Novak, managing director of the Chicago-based company. The firm sold the stake in the first quarter.

China, the biggest consumer of industrial metals, will expand 10.1 per cent this year, more than three times the pace of the US's anticipated 3.2 per cent gain, according to as many as 77 economists surveyed by Bloomberg.

"The feeling now is as we move into the expansion phase of economic growth, we want to be diversified in economically sensitive metals," Novak said. "We're not negative on the economy now."

While gold is favoured by investors when the US dollar weakens and inflation gains, the metal can also advance at other times. Gold rose 5.8 per cent in 2008 as US consumer prices gained 0.1 per cent. The metal added 18 per cent in 2005 when the US Dollar Index, a measure against six counterparts, advanced 13 per cent. Gold rose 7.3 per cent this year as the US Dollar Index jumped 9.6 per cent. US consumer prices dropped in April. "People are afraid of the debasement of all the currencies," said Peter Schiff, president and chief global strategist for Darien, Connecticut-based Euro Pacific Capital. "What's surprising is that gold is still as low as it is," he said, predicting $US5000 to $US10,000 an ounce in the next five to 10 years.

Buying rose as European policymakers agreed on $US1 trillion emergency loan package to prevent sovereign defaults.

Gold is still at half the peak set in 1980, after adjusting for inflation. Then, prices rose to $US850, equal to $US2266 today.

Supply from mines, which peaked in 2001, fell in five of the last eight years, data from London-based GFMS show. Companies are digging deeper to extract dwindling reserves, with mines in South Africa extending as far as 3.8km down.

Investment, including bars and coins, almost doubled to 1901 tonnes last year, exceeding jewellery demand for the first time in three decades, according to GFMS. Jewellery will jump 19 per cent to 2100 tonnes this year and industrial use 8 per cent to 398 tonnes, Sydney-based Macquarie Group says.

Central banks and governments are also buying gold, adding 425.4 tonnes last year, for a combined 30,116.9 tonnes.