In its Gold Survey 2012, GFMS urged investors to exercise caution in the short term due to a strengthening US dollar resulting from lower expectations of another round of quantitative easing, as well as the easing of the Eurozone debt crisis.
According to Kitco, London PM Fix gold has so far averaged $1687.20/oz this year after averaging $1571.52/oz last year.
Earlier this year, GFMS forecast an average gold price of $1640/oz for the first half of this year.
"The low $1600s came as little surprise and it's quite possible we'll see a push even lower, perhaps below $1550 in the next month or two," GFMS global head of metals analytics Philip Klapwijk said.
Spot gold hit an all-time high of $1921.15/oz on September 6 last year and Klapwijk was optimistic those levels could not only be reached again but exceeded in the medium term.
"We could easily see late September's record high being taken out and a push on towards $2000 is definitely on the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of next year," he said.
Factors driving the gold price will be renewed fear over Eurozone debt, led by Spain, which has already been in the news this week.
GFMS has also tipped additional monetary policy measures in the US as the economic recovery falters, while China, India and Brazil are tipped to adopt additional loosening strategies.
"A corollary of all this monetary largesse is fears about resurgent inflation and that becomes all the more likely if oil prices motor higher, should tensions get any worse between Iran and the US," Klapwijk said.
Overnight, gold on the Comex division of the New York Mercantile Exchange was unchanged at $1660.30/oz and London AM Fix rose 0.6% to $1654/oz.
At midday AEST, spot gold was trading at $1658.10/oz.
Meanwhile, global gold investment jumped 15% last year to $80 billion with official sector purchases by central banks rising to 450 tonnes.
Mine production last year rose by 3%, the third consecutive year of gains.
"It seems evident that the mining sector is deriving clear benefits from a decade of rising prices, as this has given us a healthy pipeline of new projects coming onstream and high absolute prices, as that means several mature operations are staying productive for longer than would otherwise have been the case," Klapwijk said.
Jewellery demand is set to remain resilient with Chinese demand soaring to record levels last year, offsetting a slight drop in Indian demand.