* Mining costs increasing steeply

* Emerging markets, central banks to drive demand

LIMA, May 14 (Reuters) - Sharp increases in mining costs mean gold will need to reach $3,000 an ounce in five years for the industry to stay profitable, World Gold Council chief executive Aram Shishmanian said on Monday.

Miners currently needed a gold price of $1,300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.

"If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business," he said. However, he was optimistic sustained demand would drive prices higher over the long term.

Spot gold fell to a four-and-a-half month low of $1,556.5 an ounce on Monday on concerns over the European debt crisis. Normally a refuge for investors in times of economic turmoil, gold has recently traded in line with risk assets like base metals and stocks.

Future demand would come from emerging markets, central banks and investors, Shishmanian said, noting that China and India now represent 55 percent of the world gold market.

"Emerging markets are going to hold increasing amounts of gold reserves," Shishmanian said. "Holding billions of dollars doesn't help them. The alternative potentially is gold."

Exchange traded funds backed by gold currently hold $120 billion, he said.

"This is the tip of the iceberg," he said. "U.S. pension funds do not hold substantial amounts of gold but we see that changing over the next 20 years."