TORONTO (Reuters) - Canada's recently laggard gold sector finally seems to be realising the benefits of soaring precious metal prices, and with shares in the sector still relatively undervalued, analysts predict big gains to come.

The price of bullion topped $745 on Friday, touching its highest level in 28 years, and about 60 percent above its level just two years ago.

Gold stocks have at times followed the bullion price higher, but have failed to match the metal's percentage gains over the last few years. This time, with analysts seeing firmer foundations under gold prices, the thinking is that gold equities could be set for a run.

"Right now, the stocks have been acting very well, because they had been lagging for a period of time, and (the rise) would be on the basis that gold the metal has broken out here," said John Kinsey, portfolio manager at Caldwell Securities.

The most recent push for bullion came as the US economy was hit by tight credit conditions and troubles in the risky, sub-prime mortgage market.

That prompted the US Federal Reserve to cut its overnight rate by 50 basis points in mid-September, and now analysts are seeing a situation of low interest rates and inflationary pressures that should continue boost gold's safe-haven investment status.

Add to this strong jewelry demand in Asian economies and the increasing difficulties and costs of finding and developing new reserves, and some are saying there is a good bet gold will break its 1980 record high of $850, if not this year, then soon.

"The fundamentals on the metal are I think very very good," said Kinsey.

At the annual Denver Gold Forum this past week, several chief executives and analysts predicted heady gains for the metal.

Greg Wilkins, CEO of top producer Barrick Gold, said he expected it to hit $800 before the end of the year and wouldn't be surprised to see it at $1,000 in the future.

Economist Martin Murenbeeld said he expected gold at $823 next year.

While gold stocks have rallied over the past month, many are still down year-to-date, which means some may have a lot of room to run to catch up to the price gains.