Gold prices could clear the $700 a troy ounce level by the end of the year, driven by a return of significant investor buying, according to GFMS, the precious metals consultancy.

Gold has fallen by more than $140, or almost 20 per cent, since May when it reached a 26-year high of $730 a troy ounce, but GFMS said conditions were still right for a significant increase in investor interest as problems in the US housing market have created a bleak outlook for the American economy and particularly the dollar.