New Delhi, Sep 15 (IANS) Gold is expected to cross the $700 per troy ounce mark before the yearend due to significant investor demand despite the short-term weakness, a leading global precious metals consultancy has forecast.

"Gold price could well track higher, clearing $700 before yearend (1 troy ounce = 31.10 grams). The prime driver of this move was seen as the return of significant investor buying," the London-based Gold Fields Mineral Services (GFMS) said in its latest 'Gold Survey 2006'

Over the past 10 days, global gold price has witnessed a fall from levels above $630 per ounce to below $580 per ounce on Thursday. This trend is not expected to last, feels GFMS.

"All the conditions are still there for a big up-tick in investor interest. As ever these centre are on the dollar and we're still bearish on that given the huge US trade deficit," said Philip Klapwijk, executive chairman of GFMS.

Looking further into 2007, GFMS expects the prices of bullion to go yet higher, "particularly if we were to see a major 'event' such as US military action against Iran".

But Klapwijk warns "timing is everything". "Recent weakness hasn't surprised us that much as there's little around to drive the price up at the moment - certainly with the jewellery sector still looking shaky - until the investors come back in force. But we could be getting close to the start of a big move higher."

The consultancy has however cautioned that possibilities of gold prices remaining at high levels are by no means guaranteed. Conditional to any global economic slowdown like weakening in US economy or a fall in Chinese growth, GFMS expects the gold prices to get caught in the downdraft.

However it is more positive on the gold prices rising with no major threat on supply side.

On the demand for gold, the report highlights that jewellery demand is expected to remain sluggish particularly in price sensitive regions like India and the Middle East.

The decline in gold off take has not been restricted this year to just the price sensitive regions but also in western markets like Italy and the US.

In the short term, as during this week with prices dipping below $600 per ounce, the pent up demand is expected to drive sales of gold jewellery.

Overall GFMS has forecast that world jewellery fabrication would fall by 19 percent in 2006 to 2,205 tonnes, a figure nearly 1,100 tonnes below its peak in 1997.

Both 26-year high and volatile gold prices were the main drivers behind the fall in the global total. As well as the gold price briefly touching $725 in mid-May, the first-half average was over $160 higher year-on-year.

Analyses of jewellery fabrication during the first six months of this year revealed that India suffered the greatest loss, with the country's first half total effectively half the level of a year ago.

As well as facing persistent and high levels of price volatility, the Indian market had to contend with record high rupee gold prices (in contrast to dollar gold's 26-year high).

The Middle East also posted a large first half drop, with Turkey and Saudi Arabia, the region's largest fabricators, both recording losses of over one-third year-on-year.