Prices have been below $300 an ounce for several years and we do not see them recovering for four or five years

Neil Hawkes, CRU International

But with the precious metal trading at about $260 an ounce, gold has resolutely failed to lift off recent lows and analysts say it is unlikely to do so in the foreseeable future.

Just this week, two major North American producers issued lacklustre results for the first three months of 2001, as the slumping price of gold continued to hit their operations.

And one of the two miners - Placer Dome - even said it was considering diversifying into platinum as a potentially more lucrative sideline.

"It happens to be a high margin business and I think if we had a small piece of it, it would fit us well," said Placer's president Jay Taylor.

"It's definitely a precious metal and good as gold in my mind," he added.

Worldwide slump

North America's miner see just the tip of the slag heap; gold is undergoing a worldwide slump in demand.

Developing countries are some of the most voracious buyers of gold, and India is the the world's biggest gold consumer.

Developing countries are finding gold more expensive now

But as their currencies weakened against the dollar in recent months, gold has become more expensive and imports are falling.

"The key issue is that many of the major consuming countries are not the world's major currencies," Kevin Crisp, a precious metals strategist at Credit Suisse First Boston (CSFB) told BBC News Online.

"Indonesia, for example, has been a major gold consumer, but its currency, the rupiah, is weaker against the US dollar, so that makes gold more expensive in rupiah terms."

Analysts do not see the situation improving in the short term.

"Prices have been below $300 an ounce for several years and we do not see them recovering for four or five years," Neil Hawkes, a commodity analyst at CRU International in London, told BBC News Online.

Selling off reserves

30,000 tonnes of gold is still held by central banks worldwide, despite a steady stream of countries selling off their reserves.

In 2000, gold mine production was significantly higher than in 1990 because the average cost of mining gold fell significantly

Kevin Crisp, CSFB

The Latin American banks have been the latest to announce such a move, following in the wake of European countries such as Switzerland and the UK, which has been auctioning off its gold reserves every two months.

By the time the UK government winds up this latest round of gold auctions, it is estimated to have sold around half of the country's gold reserves. And more auctions could be in the pipeline.

There are only a few countries still holding on to their gold. The United States, for example, has so far resisted pressure for even a partial sell-off.

Production cuts

With gold prices low, but production near record levels, the world's four major producers - South Africa, Australia, the United States and Canada - have seen profits squeezed.

"To keep shareholders happy, they [the gold producers] have been looking to cut their costs but up until now, they have failed to do this," Neil Hawkes of the Commodities Research Unit (CRU International) told BBC News Online.

Aerial view of a gold mine in South Africa

"There have been lots of mergers between companies and merger talks, but so far these have failed to cut production," he added.

Put simply, there is too much gold being produced to meet global demand.

But Kevin Crisp, precious metals strategist at CSFB, puts in a word of support for the mining industry.

"It has listened to the challenge; helped by the strength of the dollar, revenues in local currency terms haven't been so bad,"

"In 2000, gold mine production was significantly higher than in 1990 because the average cost of mining gold fell significantly."

A sparkling future?

As world markets have slumped, so there has been a corresponding drop in demand for gold, traditionally a safe haven in times of economic uncertainty.

Last year, about 85% of gold sold went to service the jewellery sector.

But with spending on luxury goods suffering during the downturn, gold jewellery, which traditionally has not been marketed as aggressively as other top-end products, has been hit hard too.

So people will not be flocking back to the gold shops until the 'feelgood' factor returns.

Investors, too, are unlikely to be tempted back - in the short term at least - says Neil Hawkes of CRU International.

"Gold hasn't proved to be a safe haven for investors. People don't see it as a very bullish metal to spend their money on."

Gold producers, as they seek to streamline their industry and make it more efficient, will be hoping that investors and consumers will be persuaded to change their minds.