A number of factors have combined to create a new gold boom

Costs also have been driven by demand for gold jewellery and concerns that quicker inflation in the US will erode the value of shares and bonds.

Gold rose as high as $487.90 (�284.50) an ounce in Friday trading.

Although the price fell back in afternoon US trading, analysts predict it may climb to $500 by the end of this year, and could go even higher.

"It will certainly hit $500 without any trouble," said Martin Potts, a mining analyst at Teather & Greenwood stockbrokers.

Gold prices have been recovering steadily since they hit a 25-year low of $255 an ounce in 2001.

Since then, the dollar has weakened and fears about the long-term health of the US economy - fuelled by its spiralling trade and fiscal deficits - have grown.

Market squeeze

Analysts said mining companies have recently struggled to boost output, hampered in part by higher production costs and a failure to find large new reserves.

Demand for jewellery, meanwhile, has remained steady, and investors have been turning back to gold, lured in part by tracker funds that are linked to the price of the metal.

At the same time, a number of central banks, including Russia's, have been hinting that they might increase gold supplies and cut their holdings of the US dollar.

Russia currently has about 500 tonnes of gold in its reserves and any plan to double that would put upward pressure on global markets, analysts said.