IT IS 25 years this month since gold hit its all-time high of $850 an ounce and people were queuing in the streets outside jewellery shops trying to capitalise on their family heirlooms.

At $425 an ounce, the precious metal is still a long way off that peak but it has risen 48.6% over the past five years, compared with a fall of 24.9% in the FTSE 100 index, and it hit a 16-year high of $453 an ounce in November. Many analysts expect the price to climb further. So is now a good time to buy? A survey conducted by the World Gold Council (WGC) found that 60% of analysts expect gold to end the year above last November’s high, although none is forecasting a return to $850.

Ross Norman at The Bullion Desk, an analyst, said: “In 2005 gold prices may achieve fresh highs but not the heady levels seen in 1980.”

The gold price surged by more than 265% between January 1979 and the peak a year later but analysts believe a repeat is highly unlikely.

Anita Saunders at the WGC said: “The gold spike in 1980 was caused by exceptional conditions that do not exist today.”

Gold is often regarded as a haven for investors in times of political uncertainty. Throughout the 1970s there was a climate of high and rising inflation with oil-price shocks and concern over economic growth.

These problems were exacerbated towards the end of the decade by the Iranian revolution, the Iran-Iraq war and the Soviet Union’s invasion of Afghanistan. These events led to a general lack of confidence that sent the gold price soaring.

The global economy is more stable now and inflation is low, but the war in Iraq and the US dollar’s weakness are expected to push the gold price higher this year.

Bhargva Vaidya of BN Vaidya & Associates, a financial consultancy, said: “Geopolitical pressure in the Middle East, terrorist threats and natural disasters will keep people interested in gold.”

Investors have also been turning to the precious metal as an alternative to the ailing dollar. Over recent weeks the American currency has picked up slightly, leading to a sell-off in the bullion market.

Gold is currently 6% lower than the November high, but the dollar’s recovery is expected to be short-lived because of America’s huge trade gap.

Daniel Hynes at ANZ, an Australian investment bank, believes the value of gold could reach $480 this year. He said: “The dollar will remain the main driver of gold prices. We expect that America’s current-account deficit will continue to widen and not show any sustained improvement until the second half of the year. This is expected to place further downward pressure on the dollar in the near term, which should result in a rise in the value of gold.”

Alan Williamson at HSBC thinks the price could climb even higher. He said: “We expect the US Federal Reserve to start cutting interest rates again by the end of the year. This should underpin a steady rise in the gold price throughout 2005, with spikes above $500 possible in the second half.”