The price of gold is forecast to average $1,270/oz this year, 10% lower than the 2013 average of $1,411.23/oz, according to the latest research from GFMS.
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"After its wild gyrations in 2013, with a range of 42% -- based on the London PM fix -- gold price movements have been much more circumspect in the first part of 2014, with a range of 13%," the GFMS team at Thomson Reuters said in its Gold Survey Update 1.
Although a test of $1,200/oz "is easily foreseeable" this is likely to spur the price-sensitive physical market.
GFMS said the physical market, which has been largely absent in 2014 so far, is "likely to experience a substantial resurgence in demand. This is likely to help to put a floor in place and longer-term forces, both in terms of physical fundamentals and economic and financial price drivers."
As such, from 2015 the research firm is predicting a return to a bull market for gold.
The market is expected -- prior to any ETF or over-the-counter activity -- to be in a small surplus this year, but "the fundamental position will start to tighten during 2015 as underlying demand strengthens, taking the market into a deficit."
The gold price will "bottom out during 2015 before embarking on a gradual bull market," it said.
Looking at current market conditions, "the economic and financial environment has not been conducive to gold investment of late," it said.
One bearish factor for gold is the current strength in the US dollar.
This was underlined Wednesday when the Federal Reserve indicated it could increase interest rates more sharply than initially forecast.
After a closely watched meeting, the Fed said Wednesday it would stick to its timetable on interest rates, keeping them at a record low of 0-0.25%.
However, it did suggest that when rates eventually increase, they could rise more than the market is currently expecting.
Both outcomes, the fact that the dollar remains cheap for the time being and the fact the US Fed is indicating that the US economy is on the mend, likely increased the dollar's strength and weighed on gold.
"The lack of price performance has helped to lead to short positions in the market, extended by the impact of Fed-watching," GFMS said.
Gold was spot bid as of 0858 GMT Thursday at $1,223/oz, having fixed in London Wednesday afternoon at $1,236/oz.
On January 2 the precious metal fixed in the afternoon at $1,225/oz.