* Prices to average $1,277/oz in 2014, $1,250/oz next year
* Silver seen averaging $20.20/oz this year, $20.00/oz in 2015
By Jan Harvey
LONDON, July 22 (Reuters) - Gold will drift lower in the second half of 2014, leading to a second yearly drop in the average price after a dizzying decade-long rally, as U.S. monetary policy returns to normal and Asian demand is weak, analysts forecast in a Reuters poll.
The survey of 31 analysts and traders this month returned an average forecast for the third quarter at $1,270 an ounce, down from the average first-half price of $1,290 an ounce. In the last three months of the year, it is seen averaging $1,255.
For the full year, respondents returned an average forecast of $1,277 an ounce, little changed from a forecast in a similar poll conducted in early April.
That will mark a second year in which gold’s average price has fallen, following a 15.5 percent retreat in 2013, the first drop in more than a decade. No recovery is seen in 2015, when gold is expected to edge a touch lower to $1,250 an ounce.
The metal rose around 10 percent in the first half, rebalancing after a slide to three-year lows last year. With the impact of the U.S. Federal Reserve’s tapering of its extraordinary stimulus measures now broadly priced in, prices are expected to hold within narrow ranges for the remainder of the year.
“We are mildly bullish for gold in general this year, but we feel that many of the gains may already have been made,” Mitsui Precious Metals analyst David Jollie said.
“Tapering should be fully priced into the precious metals markets. However, as we come closer to the end of that process, market uncertainty is likely to increase as the Federal Reserve’s intentions are less clear.”
Gold’s performance this year has featured extended periods of rangebound trading, punctuated by brief, sharp moves upwards or downwards within a broader range.
The spread between gold’s highs and lows for the year is currently the narrowest since 2005.
Volatility picked up dramatically during the financial crisis that followed the collapse of Lehman Brothers in 2008, as investors bought the metal as a haven from instability in the wider financial markets.
Softer demand for physical gold in the major Asian markets is also preventing a bigger price move, analysts said.
India surprised bullion markets this month by keeping an import duty on gold and silver unchanged at 10 percent in its government budget, a move likely to limit overseas purchases.
“Physical demand in the major consuming Asian region, and particularly India and China, remains below average,” said Aurobinda Prasad, head of research at Karvy Comtrade. China and India between them account for more than half of global physical gold consumption.
Silver prices are forecast to average $20.20 an ounce this year, down 15 percent from $23.78 an ounce in 2013. The forecast was marginally below the average price view for 2014 delivered in April of $20.40 an ounce.
Investors in silver have been wary of buying after hefty price volatility in recent years, including two instances in which the metal lost nearly a third of its value in a matter of days. Silver fell 36 percent last year as gold prices tumbled.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, hit its highest in nearly four years in May as gold outperformed, though it has since pulled back.
“I expect silver will continue to underperform gold as ... it will not benefit from safe-haven demand,” Daniela Corsini, an analyst at Intesa Sanpaolo, said. “I expect industrial demand for this metal will not be strong enough to significantly erode the market surplus.”
In 2015 silver prices are expected to average $20.00 an ounce. (Additional reporting by Anupam Chatterjee in Bangalore; Editing by Veronica Brown and Jane Baird)