Gold. Picture: REUTERS
Picture: REUTERS

THE gold price is forecast to begin a "slow recovery" this year and is expected to trade above $1,200/oz towards the end of the year, averaging $1,164/oz, Thomson Reuters GFMS said in its 2015 survey.

"While the gold price is likely to remain under pressure for some time, the prospects look brighter for 2016, particularly in the second half," the precious metals analysts said.

"Firstly, slowing Chinese growth and the negative outlook for the yuan should benefit gold in the medium term, and once there are clear signs of a price recovery, or at least, stabilisation, we should see investors coming back to the market," it said.

While the market has largely expected four US interest rate increases this year, GFMS said the weak economic recovery in the US and the "highly accommodative stance of monetary policies outside the US" meant it expected only two small interest rate increases.

"This should again strengthen market sentiment," it said.

In the fourth quarter of last year, total gold supply fell by 7% year-on-year, mainly because of the largest drop in mined supply since 2008, GFMS said.

Gold demand increased 2%, fuelled by central bank buying and increased retail investment in the metal. Gold jewellery demand fell by 2% because of "disappointing" demand out of China.

"We expect to see a rebound in pent-up demand from Asia and a further contraction in global mine production," GFMS said.

India remained the leading gold consumer for the second year running in 2015, with jewellery demand hitting a record high of 703 tonnes.