Underlying physical demand is starting to pick up in 2015 and will "givethe market longer-term ballast" although more headwinds remain before a returnto a bull market, analytical company GFMS said Thursday.
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In conjunction with Thomson Reuters, GFMS said in its Gold Update 2report that professional investors are absent as the dollar "remains king.Fresh professional investment is unlikely much before there is clarity on theFed's timing over rate hikes."
Continued monetary easing in Europe, Japan and China will support thedollar in the medium term, pointing away from gold investment, "especially asUS equities, on an historical multiple at least, are not over-extended."
It also cautioned that recent strength in the gold price, which has beenas high as $1,307/oz so far in 2015, has been driven by short-covering, notfresh long positioning.
"Although this means that the market is not under a speculative overhang,it also points to uncertain sentiment," GFMS said.
However, further out the analysts start to get more bullish.
"For the longer-term there are a number of forces in place; the SwissNational Bank abolition of the Swiss franc/euro cap is arguably bullish, as isthe fall in the oil price -- over 60% of jewelry demand comes from countriesthat benefit substantially from lower oil prices," the report said.
It didn't provide price forecasts.
Mine production growth is expected to "slow to a trickle" in 2015 whilescrap supply is expected to bottom out.
The LBMA London Gold price settled at $1,275.50/oz Thursday morning.
--Ben Kilbey, firstname.lastname@example.org
--Edited by Jonathan Fox, email@example.com
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