Gold is set to trade back down below $1100 per ounce in the final quarter of 2015 with its price remaining under pressure until there is more clarity on the timing and scale of US rates' normalisation a new forecast said on Monday.

The predicted sub-$1100 price in the fourth quarter will bring the annual average price of the yellow metal to $1159 per ounce in 2015.

Gold prices which reached above $1180 last Wednesday before the Fed news dropped to around $1140 in the early Friday session. On Thursday gold plunged $28.80 or 2.45 per cent after the Fed signalled that a December rate hike was still on the table.

The persisting bearish outlook despite improving fundamentals in third quarter when physical demand for the metal surged seven per cent has been forecast as India regained its top position as the largest overall consumer of gold this year through the third quarter. Total consumption in the third largest Asian economy amounted to 642 tonnes in the first nine months with China trailing by 63 tonnes.

Among other bearish factors of gold identified by Thomson Reuters in its survey are low inflation expectations and generally weak investor sentiment towards precious metals. That said gold may draw some support from a seasonal uptick in physical demand towards year-end and the prospects look brighter for the next year.

According to the "Gold Survey: Q3 2015 Review and Outlook" report the demand growth in third quarter was due to an increase in net official sector buying and a stellar level of retail purchases of bars and coins.

The survey found that third-quarter jewellery fabrication the largest consuming sector was marginally lower year-on-year as higher demand in India was offset by a slow recovery in Chinese offtake although demand in the latter was not as bleak as in the first half. However total gold supply was slightly higher in the third quarter largely thanks to a three per cent increase in global scrap supply while mine production remained broadly flat compared to a year ago.

While jewellery consumption in India increased by five per cent year-on-year to 193 tonnes in third quarter China's gold demand rebounded to 196 tonnes a modest three per cent year-on-year improvement after a lacklustre second quarter.

In the third quarter India had the highest quarterly consumption since first quarter 2011 and the highest third-quarter demand since 2008. Retail investment rose 30 per cent year-on-year to 55 tonnes the highest since fourth quarter 2013. Gains in the third quarter were primarily attributed to the fall in the local gold price to the lowest since August 2011. Gross official imports to India in third quarter 2015 were 263 tonnes up by 23 per cent year-on-year and also the highest quarterly volume year-to-date.

In China improvement in gold demand during the third quarter was driven by several factors. First with many investors having lost faith in the equity market gold has regained its attractiveness as an alternative investment vehicle. Second demand for gold both in the form of jewellery and investment bars picked up immediately after the gold price breached $1100 in mid-July. Another game-changer had been the official depreciation of the yuan.

On the supply side global mine production remained broadly flat in third quarter up by less than one per cent year-on-year with production provisionally estimated at 851 tonnes. The survey report said supply from scrap continued to recover for the second quarter in a row rising by three per cent in third quarter mainly thanks to stunning gains in India and Turkey of 48 per cent and 154 per cent respectively. Excluding these countries total scrap in the rest of the world declined by five per cent year-on-year.

ETF gold holdings declined by 61 tonnes in the third quarter although buying seems to have returned in October.

"With only a marginal growth in total supply the seven per cent increase in physical demand led to a smaller surplus in the market of 51 tonnes for third quarter" it said.

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Issac John Associate Business Editor of Khaleej Times is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years including 23 years with Khaleej Times. A post-graduate in English and graduate in economics he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends he is respected for his astute understanding of the local business scene.