While several wealth managers predict further gains for the gold price to fresh records, one firm, Kleinwort Benson, predicts the rapid ascent of the yellow metal is a bubble that will eventually burst.

Firms such as the appropriately named Yellow Capital, as well as banks such as Rothschild Private Banking & Trust, have in recent weeks suggested that gold remains a strong asset. The metal has risen by around 70 per cent in three years, rising by 25 per cent since January alone, now standing at around $1,355 an ounce. Analysts at Goldman Sachs see the metal hitting $1,650 per ounce in 12 months’ time.

The gold price has been driven higher by factors such as the weak dollar (gold is priced in dollars so falls in the greenback, which hit gold exporter revenues, encourage them to push up prices) and fears of inflation due to quantitative easing. Even before the credit crisis broke in late 2007, gold had been boosted by years of underinvestment in supply and rising demand from emerging markets – and heavy gold users – such as India.

But that gold run may not last, said Kleinwort Benson’s head of advisory portfolio management, Andrew Thompson.

Gold is difficult to value from a fundamental perspective, as it has no yield, Thompson said, so its price can be inflated further by dual forces of "fear and greed", Kleinwort Benson said in an investment note.

In the short term, Thompson said gold looks "overbought" and some correction is inevitable. His investment note, however, fought shy of predicting when such a correction might take place.