Gold is expected to trade back down below $1,100/oz in the fourth quarter (Q4) of 2015, which brings an annual average of $1,159/oz during the year, according to a newly released Thomson Reuters report.

Gold is set to remain under pressure until there is more clarity on the timing and the scale of US rates normalisation, said the report entitled “GFMS Gold Survey: Q3 2015 Review and Outlook”, an authoritative source of independent supply and demand data for the gold industry.

Among other bearish factors 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.

In country markets, India regained its top position as the largest overall consumer of gold this year through the third quarter. Total consumption amounted to 642 tonnes in the first nine months, with China trailing by 63 tonnes.

“On the supply side, according to our initial estimates global mine production remained broadly flat in Q3 2015, up by less than 1 per cent year-on-year, with production provisionally estimated at 851 tonnes. De-hedging is estimated to have prevailed with ongoing deliveries into hedges likely to have exceeded fresh hedging activity,” the report said.

“Supply from scrap continued to recover for the second quarter in a row, rising by 3 per cent in Q3 2015, 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 5 per cent year-on-year.”

Market balance

With only a marginal growth in total supply, the 7 per cent increase in physical demand led to a smaller surplus in the market of 51 tonnes for Q3 2015.

Investor sentiment

Investors have in general remained cautious, as uncertainty around the timing of the first US rate increase has continued to weigh on sentiment.

“That said, the persistent lack of inflation and emerging market concerns pushed back rate expectations, providing a temporary boost to the gold price. CFTC-reported Managed Money data on COMEX, as of the 13th October, shows a long speculative position in gold (futures and options) at its highest since May,” the report said.

“After hitting a fresh high in July 2015, short speculative positions had plunged through to October, reaching the lowest level since March 2015. ETF gold holdings declined by 61 tonnes in the third quarter, although buying seems to have returned in October.” – TradeArabia News Service