Gold shows no sign of losing its glitter soon

Ask anyone who works for or with mines in Northern Nevada, and they'll tell you they don't see an end in sight to today's high prices.

Of course, there's no such thing as a pessimistic miner, says James Steel, precious metals analyst for HSBC in New York.

That's why we consulted Steel and other independent sources for the real lowdown on the future of gold prices.

Their verdict? Those miners may be onto something.

Steel says he sees prices staying firm at around $1,700 an ounce and the 12-year bull market in gold staying intact.

An early September report from Thomson Reuters GFMS in London was even more positive. It listed the Eurozone's financial woes, the U.S. monetary stimulation and the country's looming fiscal cliff as factors behind its forecast of $1,800 an ounce by year's end, and $2,000 an ounce in the first half of 2013.

As of Sept. 13, the London Bullion Market Association, a trade group for the wholesale gold and silver market, pegged analyst estimates for gold prices at an average $1,766 an ounce through December.

Steel wouldn't say how long gold's rally will last, because HSBC is still crunching forecasts. But he says the factors analysts watch point to a steady gold market.

The Federal Reserve on Sept. 13 announced it would launch a third round of quantitative easing, or buying up Treasurys and other assets from banks to pump money into the sluggish national economy. With more dollars circulating, inflation rises and the dollar weakens. Investors buy gold as a tangible asset with rising value as a hedge.

Foreign central banks are also snapping up gold to diversify reserve assets heavy on the flagging dollar, Steel says.

Gold jumped $38.40, to $1,772.10 per ounce, on the Fed's announcement.

Also helping gold prices: deficit spending, which makes investors nervous about the dollar's strength.

"And I don't think anyone thinks we won't have deficit spending into the future," Steel says.

Plus, gold prices typically pace above-average prices for other commodities, such as oil or wheat. That's partly because inflation helps spur commodities prices in general, and partly because rising prices for oil or food often signal geopolitical unrest in crude-producing or Third World regions.

A few factors could hurt gold's rally. For example, Steel cites a weak monsoon season in India, which meant less farm income, and less money for gold jewelry there. Rising interest rates could also hurt gold prices, which can fall when interest rates on cash accounts increase.

For now, though, the Fed says it expects to keep the short-term federal funds interest rate at or near zero at least through mid-2015.