Are the gold bugs finally going to get their revenge?

As readers may recall, the price of gold as set in London hit an all time high of $197.50 on December 30, 1974. That peak came just before the relegalization of gold purchases by American citizens for the first time since the 1930s and amidst widespread predictions of far higher prices to come.

However, the gold rush that the specualtors anticipated never materialized. And gold prices, instead of surging, dropped steadily until they reached a bottom of $103 an ounce in August 1976.

Since then the price of gold has substanially recovered, and in the past few weeks it has gained about $10 an ounce, a major move for the metal. Yesterday the price of gold closed at $194.30 an ounce in London, up $1 for the day but still below its peak this week of $195.50 which coincided with the dollar's plunge below the 200-yen level.

With gold once again poised below the $200 an ounce barrier, many gold-watchers are forecasting that the emotionally-freighted metal will this time break decisively through the $200 level and score some significant gains in the next three to six months. Prices of $250 an ounce are considered possible.

The weak dollar, resurgent inflation and turbulent currency markets are feeding the move into gold which has traditionally served as an investment haven in times of economic uncertainty.

This hedge buying by sizeable investors here and abroad comes on top of what is already a strong worldwide industrial demand for the metal.

European banks and speculators who have made handsome profits in such strong currencies as the Swiss franc and Japanese yen over the past year are also said to be moving into gold because they expect the action in the metal to be more yeasty over the next six months than it will be in the currency markets.

While much of the impetus seems to be coming from traditional centers of gold demand like Europe and South-east Asia, Americans are also said to be getting into act more and more.

Analysts note that since 1975 Americans have become increasingly educated and sophisticated about gold investments, whether they be in coins, bullion or futures contracts.

On a daily basis, the U.S. now accounts for upwards of 25 percent of all gold purchases, and this percentage is said to be growing. The U.S. gold futures markets, which were established in 1975, have meanwhile become increasingly important in terms of establishing world gold prices.

New York's commodity excahnge - or Comex, s it is known - is by far the leading market for gold futures, and over the last year has more than tripled the number of contracts it trades. And the number of ounces it keeps on deposit to back these contracts has increased six-fold over the past year until it now stands at just under 3 million ounces, making the Comex a major factor in demand for the metal.

Moreover, an increasing number of U.S. portfolio managers who run investments for employee pension funds and even bank trust departments are said to be adopting the European tactics of keeping at least 5 to 10 percent of their assets in gold as a hedge against their stock and bond investments which usually move in a contrary direction to gold.

While this trend is still incipient, the potential dollars involved are enormous, even if only a fraction of the money managers keep only 5 percent of their assets in the metal.

With an investment as volatile and controversial as gold, there are of course a significant number of contrary opinions that say the near-term outlook for gold is flat to down.

Andre Sharon, the head of international investments research for Drexel Burnham Lambert and a gold specialist, is bullish about gold's long-term "there will be a relatively firm dollar and an unimpressive gold price." He says the point at which supply and demand for gold should balance is between $160 and $170 an ounce.

Sharon argues that U.S. economy will almost inevitably face a recession in the next year, induced by ever higher interest rates. Higher interest rates in themselves are bearish for gold, since this influences the carrying cost for the metal. And if inflation comes down, as he believes it will, this will also be negative for gold.

However, the preponderance of educated opinion about gold these

David Fritizpatrick, the London-based metals specialist for Merrill Lynch, looks for "further significant gold price increases in the next six months. "Fitzpatrick has two scenarios. If the tensions in the currency markets ease and the stock market is stable or up, he says,"gold will still make some profress, even from these high levels," because of the strong underlying demand for the metal currently.

But if currency turbulence continues and the stock market takes another drop, "you will get the typical counter-cylical relationship where the gnomes of Zurich will buy gold instead of IBM." In the latter case, Fitzpatrick predicts "a significant break through the $200 barrier." He declines to cite a specific price figure, but notes that "while it is hard to make that break, once the price breaks through, it will tend to move sharply higher." He also cauntions that it could fall back as fast as it rises.

James C.Sinclair, the managing partner in an investment firm that bears his name, has recently shifted toward a more bullish posture on gold because of what he sees as the growing tendency by European banks to shift their interbank deposits out of the strong currencies and into gold. This lative pressure on the dollar, at the same time that it bodes well for gold prices he says.

Sinclair predicts a "minimum appreciation," in gold prices to $222 an ounce, and a maximum gain to about $248 an ounce. The peak, he says, will come sometime between this November and next March. But he also adds a note of extreme caution to unsophisticated investors who might get caught in what he believes will clearly be a trders and speculators market.

"People who came into this for the first time could get a terrible initiation," says Sinclair. "Many people could get as hurt at $248 as they did at $197. The public will participate at the tail-end as they always do."

So with that strong warning of caveat emptor, the next few months could write some new history for what John Maynard Keynes once termed a "barbaros relic."