As Credit Suisse gold analyst David Davis told delegates at the Mining Indaba conference in Cape Town this week:

the world’s total new mine production is at record annual levels, in the region of 2600 tons, and it is likely to remain there for another three or four years before heading into a steady three-fifths decline over the following 25 years.

That predicted decline might seem to imply some pretty firm support for prices for a good many years - on a superficial view of one factor in gold’s demand: supply equation.

But gold’s last production peak of 1800 tons - when the price hit its then all-time high of $850/oz in 1980 - was followed by a subsequent production slide accompanied by a price fall to less than $300/oz over a decade and a half.

Paul Walker, the chief executive of London precious metals consultancy GFMS, added some other factors indicating the possibility of a repeat of the post-1980 price pattern.

Last year, GFMS reckons, new mine production delivered 62% of the gold that reached the market, scrap sales weighed in with 37% and official sales accounted for 1%.

But, and it’s a big but, Walker added that new mine production has been in decline since 2002 and the "mobilisation" of above-ground resources will be the principal driver of prices over the next few years.

Last year, jewellery demand absorbed 41% of the metal that came on to the market, other fabrication demand took 9%, dehedging by mines accounted for 6% and investment demand accounted for 44%.

In other words, investors who had climbed into the metal for various reasons - fear of inflation, expectations of rising prices, the low opportunity cost of holding bullion (interest rates have been very low) and the like - these absorbed all the newly available gold that was not needed to meet demand for physical fabrication.

As Walker put it, fabrication demand was not sufficient to absorb the entire physical supply. We are at a stage in the market where sustained investment demand will be needed to sustain current prices.

Walker reckons that sustained annual investment of between $40-billion and $50-billion, and rising, would be called for.

Is that possible or even likely? An argument of the gold bulls is that the inflation levels some are predicting to follow the deficit, financial and fiscal pump priming that has taken major economies away from the abyss of recession will underpin gold’s price.

Is that a compelling case for gold to resume last year’s price advances? The recent years of low inflation were accompanied by a four-fold rise in dollar gold prices.

As Walker argues, a new bout of rising inflation is likely to be accompanied by inflation-beating hikes in interest rates - as was the case 30 years ago - which will hoist the opportunity cost of holding "sterile" gold.

Investment holders could well decide to unwind their holdings so as to avoid those opportunity costs. In other words, inflation fears and slipping new mine production are not the sole factors determining gold’s price.

So, now what? A repeat of the ’80s?

The steadily increasing amounts of investment holdings have lifted the gold in the all-important London bullion vaults to about 7000 tons, and even a small net off-loading of part of that could swamp the investment sector’s ability to take metal and support prices.

Remember, this is a highly liquid market, which implies sharp price movements if or when (and probably when) investment demand shifts.

We are, Walker argues, at a juncture where we need to ask whether current demand patterns and prices are likely to be sustained. The trick will be to spot when the turning point comes, and we are not a million miles from that turning point.

There is still scope for further near-term rises from current price levels, but for how long? Does the ordinary investor bail out now and, perhaps, miss the remaining price-rise potential? Or does he err on the side of caution and start unwinding his positions soon?

Decide for yourself.