The dwarves of Terry Pratchett’s satirical fantasy Discworld books have a song about their principal interest which runs ‘gold, gold, gold, gold, gold, gold, gold.’ Investors have scarcely been less mesmerised by the metal in recent weeks.

As the euro zone slid ever more inexorably toward crisis, and Republican US policymakers spurned a deal on the deficit, the commodity/currency/unique asset class - there is little agreement on how it should be defined in portfolios - appeared to be one of the world's only remaining safehavens of genuine value.

Much of the media chatter has proved little more insightful on the continuing allure of gold than the Discworld dwarf song however.

For every one real analysis of its fundamental prospects and the actual underlying mechanics of its pricing there appear to be 10 articles re-stating the basic fact people really, really like gold. So we decided to compile some of the more useful contributions to the debate:

Julian Jessop Capital Economics

With the price of gold approaching $1,600 per ounce,many are asking how high prices could still go. A variety of methods suggests a target price anywhere between $1,870 and $5,000.

Our own forecast is that prices will climb to $2,000 by 2012. However, we would not be surprised to see prices reach this level sooner and then rise significantly further.

Another approach is to compare the price of gold to that of other assets. For example, the ratio of the prices of an ounce of gold and a barrel of Brent crude oil is currently13.5, some way below the average since 1970 of around 16.

But there have been several periods where this ratio has been as high as 25 to 30, which, based on current oil prices, would imply a gold price of $3,000 to $3,500.

In contrast, gold is slightly expensive relative to its long run average against equities. The Dow Jones Industrial Average (DJIA) is currently only around 8 times the gold price, compared to an average of 10 since 1900. But this ratio fell as low as 1 to 2 during the Great Depression, and again in the early 1980s. Even if the DJIA were to fall by 60% following some massive new shock, to around 5,000, applying this ratio of 1 to 2 would imply a gold price of $2,500 - $5,000

we would emphasise the risk that the sovereign debt crisis in the euro-zone eventually has far wider implications than simply the default of one or more peripheral governments. If people seriously thought that there was a good chance that the euro itself would not survive, the associated flight to the safety of gold could easily see prices surge well above $2,000. If an actual break-up were imminent we would pencil in a much higher figure.

Francois Moute - Neuflize Private Assets

‘I’m frustrated because the gold miners have not delivered, gold is up 9 or 10% but the mining companies are down by 8 or 9%.’

‘People think that the price of gold above $1,500 is not sustainable, but this argument will be eliminated the next time it goes up. I remain very bullish on gold. Once we’ve digested the recent advance we’ll go higher again because as long as we have negative real interest rates, gold will be in a bull market.’

Charles Kernot - Evolution Securities

At the beginning of April, the gold price was US$1,430/oz and it ended June at US$1,500/oz, averaging US$1,510/oz throughout the period. On average, the gold stocks which we cover have lost 16% of their value during this time, i.e. a fall entirely disproportionate to the market.

We therefore believe that the gold sector in general looks from a valuation perspective. Amongst the stocks which we cover that have recently underperformed gold, we particularly like Petropavlovsk, Aureus Mining, Avocet Mining and Cluff Gold.

While many gold equities have underperformed the gold price, the situation has been worse for Petropavlovsk which has underperformed its peers since H2 2010. This was initially caused by the market’s realisation that 2010 production targets did not look achievable.

While the company is on track to meet its 2011 production guidance, the full year production will be weighted towards the second half, and more specifically to Q3. We believe that once the market gets more comfort that this production target looks achievable, the shares will appreciate significantly.

Angelos Damaskos - Junior Gold Fund

The supply of gold is relatively small. A report by the Society of Economic Geologists which reviewed 3,730 international deposits drew some important conclusions. The main findings included that the number of deposits and total ounces found have been steadily declining ever since the 1980s; the average grade of gold mined declined from a peak of 10 grams per tonne between 1965-1975 to less than 1 gram per tonne in 2008, and that the cost of discovery has increased from $10/oz in the eighties to over $47 per ounce in 2009.

These findings confirm our belief that the supply of new gold is likely to remain constrained well into the future. Continued rise in investment demand will result in the gold price rising to higher levels. Gold mining companies should therefore see growth in cash flow and profitability that should re-rate their share prices. The companies with efficient, growing operations, strong balance sheets and active exploration programmes should outperform both the sector and the gold price. These are the companies that Junior Gold focuses on.

Economist Kash Manzori - The Street Light Blog

Surprisingly, over the past couple of years investment holdings of gold have risen by only about 3,500 tons. Comparing the total value of all investment holdings of gold at the end of 2007 with the end of 2010, we find that such holdings have risen by about $600 billion in value over that time, about $150 billion of which was due to a rise in the actual quantity of gold held for investment purposes, and the remaining effect due to the rise in the price of gold.

at most, the net influx of funds into the market for investment gold that lead to a near-doubling of the price of gold since 2007 was $600 billion (since that was the total increase in the value of investment gold).

In reality, it was almost certainly far, far less than that. If it takes an inflow significantly less than $600 bn to double the price of gold, it's reasonable to guess that a net influx of $100 bn, or probably even $50 bn per year into the market for gold investments would be enough to push the price of gold significantly and steadily higher.

So moving just 0.1% of the financial wealth of US households into gold could be enough to have a substantial impact on the price of gold. It's also conceivable that a good advertising campaign by gold producers could be enough to move the price of gold.

Note that a very similar thing happened to the market for diamonds in the middle of the 20th century. The DeBeers diamond cartel used an incredibly successful advertising campaign in the 1950s to cement the idea of the diamond as the premier gemstone, and in so doing permanently changed the value of diamonds.

Since the market for gold is so small, its price may be strongly affected by things that have nothing to do with the economy. And since the price of gold tells us nothing about the state of the economy, it should no longer be considered to be a meaningful economic indicator. So I think that it's time to drop the price of gold from our daily headlines.