For nearly every session for the last ten days, gold prices have hit a new all time high. This rise comes at a time when the economic recovery in the West remains uncertain but it’s not quite a time when investors are averse to all risky assets. Commodities in emerging market equities have soured in the past few weeks. So what is fuelling this rise in gold?

CNBC-TV18’s news editor Harsha Subramaniam spoke to Dan Smith, Metals Analyst at Standard Chartered and Neil Meader, Research Director at GFMS and got their perspective on what is fuelling this rise in gold.

Below is a verbatim transcript. Also watch the accompanying video.

Q: What to your mind are the factors that are driving this relentless rally in gold? Is the dollar’s declining a primary factor?

Smith: Yes, I think you have hit the nail on the head there. That is what we think the most important factor pushing up gold right at this point. Certainly, there is the potential for the dollar to weaken further over the next year or so. We remain pretty bullish on gold at this point and we are looking for USD 1,350 per oz averaging in the fourth quarter and USD 1,400 per oz average for next year. Prices up to USD 1,500 per oz and beyond are quite reasonable we think.

Q: Is this a case of largely the volatility in the currency markets that is driving up prices in gold at this point in time, we heard Jean-Claude Trichet talking about the fact that he is not happy with the fact that the Renminbi is not appreciated as much or as fast as he has expected. So is the volatility in the currency market driving sentiment in gold?

Meader: Volatility specifically within the currency market is certainly a factor, adds an element of uncertainty which should tend to be pro-gold. I certainly think looking at dollar weakness that’s critical to the last few days rise. If you look at what’s happened to the price in euro terms or in rand terms, they are important from a producer point of view.

The price has not really rallied at all. It has just gone sideways. In the last few days it’s certainly just a currency play. If we are looking more at recent history its slightly longer-term timeframe and other factors are that much more important.

So uncertainty surrounding equity values, sovereign debt risk is the precondition of low interest rate and potential threat from inflation. There are many reasons why gold prices are strong and it’s a fact that there are many that has given us these record highs.

Q: The volatility Index is about 20% for gold prices if you purely look at 2010 year-to-date. How much more steam do you think is left for this rally?

Smith: We see quite a bit of upside from here. In terms of volatility it’s interesting because of course its all about relative volatility. Gold has got comparatively low volatility compared to equities or the forex market at the moment. Certainly, from an investor’s point of view it still makes sense to add gold to your portfolio. It will still increase your risk adjusted returns.

Gold is volatile, but not as volatile as some of the other markets. There are still a number of reasons to be in gold. One is the portfolio reason but also there is a wider issue here as well which is there is the whole metal complex has been lifted in the last month or so.

Investors remain keen interest in gold in particular through physically exchange-traded funds (ETFs) which have reached record highs recently and also in terms of the futures positions. They are stepping up quite smartly at the moment as well. What we are seeing in gold is the hedge funds have become quite active in gold in the second quarter and we remain long on gold for the time being. So certainly a speculative interest in gold but this is a wider story for metals.

Q: Several countries have indulged in quantitative easing. We saw the news about Japan today and there are also reports that perhaps even the Fed could fuel injections in terms of increasing dollar liquidity and if that happens and if the dollar is going to be under pressures in the near-term do you think gold is likely to be the beneficiary from the near-term to medium-term?

Meader: Expectations of a second round of quantitative easing has certainly been behind the increase in the price in the last week or two. To an extent that has already been factored into the price. That doesn’t rollout further upside driven very specifically by a second round of quantitative easing but people shouldn’t make the automatic link between the two.

I would agree in the medium-term there is a good chance of further strength in the gold price but I would be very surprised if it went there in a straight line. We have seen the prices go up incredibly fast in the last few days and the market is always at risk of a correction and whether that happens in the next day or two, in a couple of weeks who knows and how far it goes down.

But as we get towards year end it wouldn’t be a surprise if we see a bit of profit taking by some of the funds. I think the gold price could well stay volatile in its move higher.

Q: One point about risk aversion that’s constantly being pointed out to attribute to this gold rally. Wwhen there is so much money flowing into emerging equities and so much money flowing into all commodities, it doesn’t quiet connect the dots, does it - when money is going only towards gold but its also coming into other asset classes?

Meader: Gold is often traded because it can often move in a counter cyclical way. It’s good for portfolio diversification. It can often be negatively correlated to other assets most obviously equities. If you have a small bit of god in your portfolio and we find out that the crisis in the West is a lot worse, quantitative easing gets a lot larger, gold will do well at the same time as some of the equities suffer. You can really see why people like it from that diversification point of view.

Q: You are quite bullish about prices at this point in time. What are the levels that you are watching on for?

Smith: We are looking for USD 1,350 per oz and then overhead trend line resistance kicks in above that level at about USD 1,368 per oz. We see a fair bit of upside. It could easily be choppy so when we got USD 1,350 per oz for the fourth quarter. That does recognise that we can go to USD 1,400 per oz and probably pull back again.

A more interesting thing is to look at when is the US going to start raising rates because we think that’s a fairly critical element for how long the run in gold will last. If we go back in time we find that for the vast majority of the year the Fed rates hiking cycle, gold will always rally in the year up to that point. Our argument is that 2011 be another strong year for gold because rate will certainly stay pinned down to very low levels. We think this should be something of a sweet spot for gold until we get to that turning point in the rate cycle