Global gold output inched up by two percent in 2005, but South Africa's gold production declined at the sharpest pace in a decade, the precious metals consultancy Gold Fields Minerals Services (GFMS) said in its 2006 Gold Survey on Wednesday.

According to GFMS, this was as a result of mine closures which came about as the country's domestic costs remained high.

The "overall ranking remained unchanged, with South Africa and Australia remaining the two highest cost countries," GFMS said. The consultancy added that South Africa and Canada saw the largest drop in annual gold production.

However, the consultancy added that, as investor demand for the precious metal remained strong, the price of gold could exceed the all-time high of $850 per troy ounce, reached in 1980.

The group said prices should continue to soar in 2006, with analysts forecasting a slowdown in US economic growth and a slide in the dollar, while political tension in the Middle East is likely to remain.

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