The gold market is starting to resemble its 1970s form after the price of the precious metal hit a 16-year high on Friday, making the current rally the second- longest since bullion was freely floated in 1971.

But, unlike the 1970s when inflation helped boost prices, this time it is lack of confidence in the dollar that is causing the metal to glisten again.

"It looks like we might have a real market back," said Peter Smith, a senior gold trader at JP Morgan Chase in London.

The current rally has lasted since April 2001, or three months after President George W. Bush was sworn in for his first term. But the rally followed 21 years of price declines from the metal's peak at $850 per troy ounce.

Friday’s high of $433.90 is about half the record in nominal terms but nevertheless represents a 70 per cent rise over the past 42 months, a longer rally than the one that took prices to record levels in the late 1970s.

Michael Lewis, head of commodities research at Deutsche Bank, said the weakness in the dollar was expected to remain for several years as the US would remain stuck with high budget and trading deficits for years to come.

"The current [gold] rally looks set to become the longest in modern times," said Mr Lewis. For that to happen the gold price would have to be higher in May than it is now, which would make it a 49-month rally, longer than the one that followed the free floatation of gold after the collapse of the Bretton Woods agreement in January 1971. That rally lasted until December 1974.

Another factor, pushing gold prices higher is talk of impending approval by the Securities and Exchange Commission of the gold exchange-traded fund in the US, an initiative backed by the World Gold Council. This gold investment product mirrors similar products list in London and Australia, and provides a direct exposure to the gold price without going to the futures market, buying physical gold or gold mining shares.

Traders said the approval could come as early as next week and that some hedge funds were taking positions ahead of an expected launch this year.

"The stars are aligned for gold. There is a perception that there will be a structural weakness in the dollar for some time," said Trevor Steel at Baker Steel Capital Managers, a hedge fund.

Mr Steel said the fundamentals for the physical supply of gold were tightening, as the industry had not been replacing production with new reserves.