LONDON Gold prices, which have fallen more than 20 percent this year, are expected to have rebounded to $1,405 an ounce by November 2014, delegates to the London Bullion Market Association's annual conference forecast on Tuesday.
Silver, this year's biggest faller with a 30 percent drop, is also forecast to rise to $25 by November next year. Platinum prices are expected to stand at $1,675 an ounce, and palladium at $837 an ounce.
Gold has dropped this year on the back of expectations that a steadier macroeconomic environment will lead the Federal Reserve to curb its bullion-friendly stimulus measures and boost other assets like stocks at gold's expense.
But with the global financial system digesting years of stimulus measures, which some analysts believe could still prove inflationary, and the recovery in global markets yet to prove itself robust, gold prospects are for recovery, delegates said.
"I think gold will likely respond to how the asset classes it competes with are doing. This year's been a phenomenal year for equities," Shayne McGuire, head of internal research and the portfolio manager for the gold fund at Teacher Retirement System of Texas, said.
"If you look at things you can potentially sell to buy equities, gold is often a natural contender. When equities are falling sharply, gold tends to do better, but the inverse can also be true, which is why it has been a natural difersifier for equity-heavy diversified portfolios."
"I believe that if equities are going to take a breather, that perhaps gold could do well."
A drop in investment interest in Western markets this year, shown by a fall in holdings of gold-backed exchange-traded funds, has placed increasing focus on the major centres of demand for physical bullion, China and India.
Demand for physical gold across the world shot higher in April after spot prices slid $200 an ounce in just two days, their sharpest such slide in 30 years.
"This year marks the shifting of Western-centric paper market to Eastern-centric physical market, with India and China accounting for 80 of physical demand from 46 percent previously," Sharps Pixley CEO Ross Norman said.
"We've seen, through our own business out in Asia, that our turnover has doubled in the Asian time zone over the last year," Jeremy East, global head of metals trading at Standard Chartered, said.
ASIA TO THE FORE
China is expected to overtake India this year as the world's number one gold consumer. Rising wealth among its growing middle class has led gold demand to mushroom in recent years.
"With the affluence of the people growing by the day, I think there's still a long way to go before you can see you've reached saturation (in China)," Victor Chow, managing director of Hong Kong jeweller Chow Sang Sang told Reuters at the conference.
"In the first half we had 60 percent (sales growth) overall compared to last year, because of the April gold rush," he said. "In the third quarter, that has tailed off, but we're still seeing healthy figures compared to last year."
India saw record imports in May after the price slide, but it has since been hit by a raft of new regulations aimed at curbing bullion imports, a major driver of its record high current account deficit. That could push imports down significantly from last year's 850 tonnes.
Import duty has been hiked for 10 percent, or 15 percent in the cast of jewellery, while new regulations state that 20 percent of imported gold must be re-exported.
Delegates were sanguine about the need to target gold imports - bullion is the largest non-essential import into India - but said meeting the terms of the new regulations would be a tough call.
"With the increase in duty, demand is hardly affected," Shekhar Bhandari, executive vice president at Kotak Mahindra baqnk, said at the conference. "Gold does become costly, but its price is more affected by spot prices and the price of the rupee."
For jewellers to abide by the 80/20 rule, exports are going to have to pick up significantly, delegates said.
Indian jewellers at the conference say they are keen to meet the challenge, but plans to expand export capacity has been hurt by a drop in domestic supply, and they face tough competition from other producers like Thailand.
(Reporting by Jan Harvey, editing by William Hardy)