(MENAFN- ProactiveInvestors) Gold edged lower as the week ended as oil prices fell again in the wake OPEC members’ failure to cut production.
Inflation is one of the drivers of gold demand as it devalues paper currencies but with fears of deflation rife in Europe already and with oil prices now tumbling the risk is seen as low at present.
Trading was subdued with US markets shut Thursday for Thanksgiving and followed by the annual shopping spree that is Black Friday.
This weekend sees the Swiss vote on whether their central bank should keep 20% of its assets in gold.
Few think the proposal will be passed as the government and bank officials have warned of the consequences but it was another reason for investors to sit on their hands.
Otherwise it was a relatively stable week for gold and this may be the pattern for the rest of this year and into 2015 according to broker JP Morgan.
This week it suggested gold would do well to average much more than US$1200 per ounce in 2015.
Concerns that have affected this year such as the strength of the dollar US interest rate hikes and weaker expectations for inflation are likely remain throughout 2015 it said.
“These headwinds should largely suppress investment demand which we believe is essential for any significant gold price appreciation from current levels.”
On the bullish side JPM expects increased physical buying especially in India and China.
Consumers are likely to take advantage of lower prices especially if bearish investor sentiment begins to weaken and consensus price estimates stabilise.
“After accumulating large gold inventories in 2013 Chinese consumers/investors have been destocking so far this year. We believe Chinese consumers will likely begin to restock at lower prices. “
Central banks of countries such as Russia are set to remain buyers says JPM and new buyers either voluntarily (ECB) or mandatorily (possible the Swiss bank) pick up their pace of purchasing in 2015.
Supply may also begin to play a larger role next year especially in gold.
The supply of recycled gold is at seven-year lows and likely to stay there with a price below $1220/oz while the miners themselves have been retrenching heavily over the past 18 months.
”Looking further out current gold prices have failed to incentivize significant exploration and the pipeline of new gold projects is very thin.”
Societe Generale also expects investment demand to ease next year as US interest rates start to rise. As a result the French broker believes the price could drop to average $1025 per ounce over the year and go lower after 2016.
Ahead of the start of US trading Friday the spot price was US$1182.
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