Gold prices will likely decline to US$1,760 an ounce on average in 2013 from last year's average of $1,850 after factoring in the 2012 year-end price of $1,675, according to research by HSBC Securities (USA) Inc.
A sales clerk tries a gold bracelet on a customer in a crowded shop in Nakhon Ratchasima last year. Gold dropped sharply in 2012’s second and third quarters as markets scaled back expectations of a third round of quantitative easing by the US Federal Reserve. PRASIT TUNGPRASERT
James Steel, a chief commodities analyst for the company, said the forecast is for an average of $1,775 an ounce in 2014 and $1,675 in 2015, with the long-term forecast of $1,500 an ounce unchanged.
This year, the company estimates a wide trading range of $1,575 to $1,950 an ounce in line with volatile market sentiment, he said.
Gold dropped sharply in last year's second and third quarters as markets scaled back expectations of a third round of quantitative easing (QE3) by the US Federal Reserve.
It was also undercut by a weaker euro in the second quarter.
As well, jewellery demand in much of the world weakened on sluggish economic conditions.
The initial strong boost from the QE3 announcement and a rally in the euro saw gold prices go on the defensive late in the fourth quarter.
It also stemmed from macro fund liquidation and uncertainty over the impact of the US fiscal cliff, which led traditional gold investors to shift away from bullion and move onto the sidelines.
"We believe that gold prices will recover this year and retain a pronounced bullish posture," said Mr Steel.
The company's research report said Fed funds will likely remain at current low levels until 2015, while both conventional and unconventional easing of monetary policy is projected to continue.
The company forecasts a modestly stronger euro this year, one that will support a bullish gold outlook.
The gold market will likely trend higher based in part on more positive underlying supply and demand fundamentals.
Emerging market demand was weak last year, but Indian consumption will likely resume due partly to positive Chinese import demand.
Central banks, particularly in emerging markets, will likely continue accumulating gold this year as a foreign exchange diversification strategy.
"Gold exchange-traded funds grew at a modest pace in 2012 despite price declines, and we expect investor demand to increase this year," said Mr Steel.
"Another source of demand is coins and small bars, which although volatile are likely to be positive this year based on recent price weakness and investor uncertainty."