HSBC projects expansion of world gold demand

January 15, 2015 09:02 AM

The latest research report by HSBC from Jan. 14 predicts that gold demand will rebound sharply in 2015, primarily for two reasons: the back of buoyed physical buying in the Asian region, and increased flow of money into bullion-based Exchange Traded Products (ETPs). According to HSBC, the global gold demand may touch 4,127 metric tons in 2015.

Gold prices posted annual drop in 2014 as gold-backed ETPs contracted in the event of rising US dollar and equities. The economic slowdown in China and the ongoing gold import restrictions in India resulted in huge drop in purchases by the world’s top gold consuming nations. The demand for gold jewelry, coin and bars tumbled in 2014.

HSBC expects moderate recovery this year based on anticipated demand hike from China and India. The strong long-term demand growth from these two countries will determine the floor and ceiling for gold prices. The gold prices are likely to average at $1,234 per ounce in 2015, almost three percent down when compared with the average gold price of $1,265.93 in 2014.

Bullion is expected to trade between $1,120 and $1,305 in 2015. Incidentally, gold prices have appreciated by 3.7% this year on speculation that U.S. Fed may hold off hike in interest rates, as inflation is less likely to fall below the set target.

Central banks are likely to accumulate more gold this year, thereby providing more support to gold prices. The total purchases this year is anticipated to be around 400 tons, increasing significantly from the levels of 300 tons during 2014. Unlike last year, the assets in gold-ETPs are likely to expand by at least 50 tons this year. It must be noted that the gold-backed ETPs had contracted by nearly 165 tons in 2014.

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