The price of gold just might hit US$1,100 an ounce this year, said London-based precious metals consultancy GFMS today.

Gold prices could move “comfortably north of US$1,000 — possibly up to US$1,100,” GFMS research director Neil Meader told a Toronto audience this morning. GFMS released its annual Gold Survey today at a presentation hosted by the CFA Institute.

Despite these predictions, the survey warns against “irrational exuberance.” This cautionary note is due mainly to the widening gap the survey found between mine production of gold and global demand for jewelry.

Today’s edition of the firm’s gold survey is its 41st. The company also does annual surveys of silver, platinum and palladium markets.

According to the report, the sub prime credit crisis helped instigate a strong investment case for gold, which spurred a strong price rally in the final quarter of last year. Risk aversion took on more prominence by the end of last year, the weak dollar persisted and equity prices fell. Thus, investors looked to gold as an insurance policy and the rally ensued.

Gold futures closed down US$8.80 yesterday at US$918 an ounce on the New York Mercantile Exchange. Earlier in March gold reached a high of well over US$1,000.

“Before gold’s recent jump from early February’s US$925 price to over US$1000 in mid-March, a survey of forecasted price targets for March 2009 ranged from US$625 to US$1035,” wrote TD Economics in its March 18 Commodity Price Index. “Many other commodities show equally wide-ranging views attesting to the higher-than-usual degree of uncertainty.”

This uncertainty was confirmed by Meader’s pricing forecasts for gold today, which ultimately ranged from US$800 to US$1,100. Prices could “move sideways” or even “retrace,” he said, adding that at the US$800 mark bargain-hunters would descend and stock replenishment would occur.

According to the survey, global demand for jewelry increased 5% in 2007, and excluding demand for scrap the rise came in at 10%. Demand in China increased in all quarters, as did the Middle East, while Italy and Southeast Asia suffered due to the slump in U.S. consumption, the survey showed.

Mine production of gold worldwide fell 0.4% for the year, hitting an eleven-year low. Losses in Peru, the U.S. and South Africa were tempered by production gains in China and Indonesia, according GFMS. Meader said he expects gold production to be “essentially flat” this year.

The survey also showed that western investment, implied net investment, tumbled last year. The report attributes this decline to “the heavy profit taking and stop loss selling, chiefly in the over-the-counter (OTC) market” in the first half of last year.

The survey also measures levels of de-hedging by gold producers. Last year de-hedging rose a strong 9%, pushed up by book eliminations and partial buy-backs, said the report. Big-time players such as Barrick Gold Corp. and Newcrest Mining Ltd. led the field in this de-hedging. GFMS predicts a major slowdown in this area for this year.

GFMS expects the positivity to persist in gold markets — to a point. Meader says it’s possible we’ve seen the lows for the year and the fourth quarter looks good for the peak. Despite the positive outlook for this year, he warned that the market is entering a period of “marked imbalance” which, he says, means the price will “have to fall at some point, and fall quite heavily.”

The GFMS Platinum and Palladium Survey is scheduled for release on April 24 and the firm’s Silver Survey will be available May 7.