Analysts: 2015 will see gold's third yearly drop, with safe-haven status shrinking

In 2015, the gold will be dropping for the third straight year, as concern eases that global economies will falter, curbing demand for the metal as a haven, according to CPM Group.

According to Jeffrey Christian, CPM managing director, bullion futures on the Comex in New York will probably average $US1208 an ounce in 2015. That would be down 4.6 per cent from 2014.

While bullion will continue to be pressured by a strong dollar, lower energy prices, rising equities and weaker Chinese fabrication demand, the "downside is limited as much of the impact from these issues already is baked into the price," CPM said.

Last year the metal posted a consecutive annual decline for the first time since 1998 as the dollar surged on concern that the Federal Reserve will raise interest rates in an improving US economy.

In February this year prices dropped the most in five months as Greece attempted to resolve its debt crisis and China and Europe took steps to shore up growth.

"People are less fearful now, and barring any catastrophe, there are no reasons for people to rush to gold," Christian said. "We may see an increase in fabrication demand, but that may not be enough to push prices significantly."

Tuesday's report indicated that euro zone business activity expanded faster than economists forecast in March, signaling that a fragile recovery in the 19-nation region is becoming more sustained.

According to the research group, net investment demand in gold fell 16 per cent to 28.1 million ounces, as "shorter-term" buyers moved toward equities.

Purchases by investors will decline in 2015 to 26.9 million ounces.

Back in 2014, central banks bought 5.5 million ounces of gold, compared with a net reduction of 0.3 million ounces in 2013. Purchases in Russia more than doubled last year.

Gold supply rose 1.1 per cent to 126.7 million ounces last year, as gains in mined metals more than made up for a decline in recycled bullion.

Fabrication demand may climb to 96.9 million ounces this year, up 4.2 per cent from 2014, "predicated on an expectation of relatively soft gold prices, and on gold prices forming a base at this relatively low level."

CPM has produced annual reports on gold and silver since 1971.