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Analysts at HSBC expect global demand for gold to pick up this year due to increasing interest from Asia, according to the report Bloomberg. Investors will also expand positions in ETFs that hold physical gold.
HSBC's James Steel and Howard Wen write in their latest report from January 14 that global demand for gold could increase by 15% this year to 4,127 metric tonnes. Demand for the yellow metal reached a record 4,582 tonnes in 2011, the year when the gold price reached an all-time high of $1,920 per troy ounce in dollar terms.
"Demand for jewellery, gold bars and gold coins fell in 2014 from the exceptionally high level of 2013. We expect a mild recovery this year due to an expected increase in demand from India and China, where long-term economic and demographic trends point to increasing demand for gold," HSBC's two analysts write in their report. These two countries represent about half of the global physical gold market.
According to Steel and Wen, gold ETFs will also pick up somewhat in 2015. They expect an increase of 50 tonnes in their total gold position this year. Last year, the largest gold ETFs collectively lost 164.4 tonnes of gold, after a whopping 869.1 tonnes of gold were removed from these investment vehicles in 2013. Globally, investors liquidated their paper positions in gold in that year, while the demand for physical Gold Coins, Gold bars and jewellery increased sharply.
The gold market can also expect support from central banks, Steel and Wen write in their gold report. Central banks will buy 400 tonnes of gold this year, after adding 300 tonnes of the yellow metal to their reserves last year. In 2012, the year in which private individuals bought less gold, central banks added a record amount to their reserves.
The two HSBC analysts believe that the Gold price will average $1,234 per troy ounce this year, down from the average price of $1,265.93 in 2014. The price will fluctuate between $1,120 and $1,305 this year, according to the duo, a ceiling and a floor that will be set by price-sensitive buyers in emerging markets.
Barclays analysts Suki Cooper and Kevin Norrish also expect a mild recovery in gold prices due to increasing demand from Asian countries. The flow of gold from West to East is likely to continue for another two decades, according to these analysts, as rising incomes in emerging markets will bolster demand for gold.
