The chief strategist of CLSA, a brokerage owned by Credit Lyonnais, made a bold prediction heard in gold markets around the world.

On Tuesday in Hong Kong Christopher Wood said gold prices could surpass $3,400 an ounce in the next three years. The analyst said that the precious metal would be a safe haven for investors seeking cover from volatility in financial markets.

Quadruple in three years may be optimistic, but to be sure, prices are on the rise. Since 2005, gold has recorded a 60% gain, to $721 where it was on mid-day trading on the New York Mercantile Exchange on Wednesday.
Concerns that the sub-prime housing loan market in the U.S. could turn into a broader credit-crunch bolster gold's prospect as a shelter. Adding to its luster are central banks -- including the Bank of Spain and the Swiss National Bank -- that seem to be slowing the pace at which they are dumping gold reserves. That allows the metal to more quickly adapt to market changes. Meanwhile, demand for gold from manufacturers, jewelers and retailers all reached new heights.

The Financial Post of Canada looks at ways to ride the gold rally. According to the article, the UBS metals group is recommending to its clients certain companies that stand the most to gain based on operating costs, exposure to base metals and growth in gold production.

The brokerage firm writes that high cost producers including Alamos Gold Inc. (TSX: AGI) and Golden Star Resources Ltd. (AMEX: GSS) have the most to gain. If the price of gold increases to $750 from $650 an ounce, the net asset value of Alamos Gold will jump by 34%. Golden Star would see a similar gain. The net asset value of Kinross Gold Corp. (NYSE: KGC) would increase by 32%; Newmont Mining Corp. (NYSE: NEM) by 27% and Agnico Eagle Mines Ltd. (NYSE: AEM) by 23%. In contrast, Centerra Gold Corp. (TSX: CG) would see a mere 13% jump in net asset value at the price hike, according to the analysts.

The challenge for companies is to manage costs. Since 2002, they have risen on a yearly average of 15%, according to GFMS Metals Consulting Ltd., London. Labor costs are up and there is fierce competition for skilled labor and experienced managers in mining regions from Australia to Alaska and Canada. The price of energy and of materials needed to extract gold -- tires, steel and explosives -- is also surging.