The gold price will stabalise in 2015 after heavy liquidation the past two years as a tighter scrap market offsets falling demand, HSBC said in a report.
The bank reaffirmed its price forecast of $1,234 per ounce for 2015; $1,275 in 2015 and $1,300 in 2016. A broad range of $1,120-$1,305 is expected for the rest of this year, HSBC analyst James Steel said.
The end of dollar rally will also support gold, said HSBC, noting that the greenback typically has an inverse relationships with the price of the yellow-metal. The dollar climbed to 1.05 against the euro in March but has since drifted back to 1.1250.
“We see the potential for modest gold price gains this year and next,” James Steel, an analyst at HSBC, said. “Investor demand should partially recover in the second half this year, mainly as dollar stays in the defensive.”
From a demand perspective, first quarter gold demand was down one percent to 1,079 tonnes from 2014, while overall demand is flat. Jewelry accounts for roughly half of global physical consumption, with a majority purchased by emerging nations like India.
“Emerging market demand for jewelry, coins, and bars = now a key driver behind gold prices – should also turn more positive,” Steel said.
After coming off a year of record production of 3,135 tonnes in 2014, mine production will level-off or decline slightly this year. Declining ore grades, shortage in skilled labour and burdensome regulation stemming from increased nationalism are some of the reasons for shrinking production
“This would represent the first decline in production in over a decade and while the amount in question is not significant, the decline itself could lend psychological support to gold prices,” Steel added.
Scrap supplies are projected to decline from 1,176 tonnes in 2014 to 1,100 tonnes this year as gold recycling shifts east to to India and China.
(Editing by Tom Jennemann)
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