Price of gold will exceed $1600 a troy ounce before year-end on strong growth in investment demand, according to the precious metals research consultancy firm GFMS.

The prospects for gold prices this year remain bright. Investors continue to be concerned about the outlook for inflation, with governments in general showing little appetite to tighten monetary policy significantly, Philip Klapwijk, chairman GFMS, said in a statement.

In addition, with the spotlight also shining on the state of government finances, there is every reason to believe that investors will remain focused on the gold market, Klapwijk said.

As a result, Klapwijk noted that he would not be surprised to see if gold breaks through $1600 a troy ounce before the end of the year.

The research firm also expressed concerns that the market may be approaching a turning point are still premature, with growing evidence that buyers are adjusting to higher prices.

The consultancy said there is scope for new highs in the gold prices, assuming investment demand taking off at some point of time this year.

Gold prices are already rising steadily this year and currently trading at $1,457.50 a troy ounce.